Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


10-K/A

(Amendment No. 1)

þ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014

2015

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIESEXCHANGE ACT OF 1934


Commission File Number 1-13884

CAMERON INTERNATIONAL CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware

76-0451843

(State or other jurisdiction of incorporation or organizationorganization))

(I.R.S. Employer Identification No.)

1333 West Loop South

Suite 1700

Houston, Texas

Suite 1700

77027

Houston, Texas

77027

(Address of principal executive offices)

(Zip Code)


Registrant’s telephone number, including area code (713) 513-3300


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, Par Value $0.01 Per Share

New York Stock Exchange


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes RþNo £o


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes £oNo Rþ


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes RþNo £o


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes RþNo £o


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £o


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer Rþ

Accelerated filer £o

Non-accelerated filer £o (Do not check if a smaller reporting company)

Smaller reporting company £o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes £o  No Rþ


The aggregate market value of the Common Stock, par value $0.01 per share, held by non-affiliates of the registrant as of June 30, 2014,2015, our most recently completed second fiscal quarter, was approximately $10,963,201,206.$8,048,562,581.  For purposes of the determination of the above statement amount only, all the directors and executive officers of the registrant are presumed to be affiliates.

The number of shares of Common Stock, par value $.01 per share, outstanding as of February 10, 2015January 15, 2016 was 193,721,697.


DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s 2015 Proxy Statement for the Annual Meeting of Stockholders to be held May 8, 2015 are incorporated by reference into Part III.


191,599,032.

TABLE OF CONTENTS

ITEM
 
PAGE
   
 PART I 
 3
1.4
 5
 7
 8
 10
 10
 10
 10
 11
 12
1A.13
1B.18
2.18
3.19
4.21
   
 PART II 
5.21
6.22
7.23
7A.42
8.44
9.84
9A.84
9B.84
   
 PART III 
10.84
11.85
12.85
13.85
14.85
   
 PART IV 
15.85
 94
PART I

GLOSSARY OF TERMS

ActuatorEXPLANATORY NOTE.

This Amendment No. 1 on Form 10-K/A hydraulic or electric motor used to open or close valves.


Blowout Preventer or BOP. A hydraulically operated system of safety valves installed at the wellhead during drilling and completion operations for the purpose of preventing an increase of high-pressure formation fluids — oil, gas or water — in the wellbore from turning into a “blowout” of the well.

BOP stack.  A set of two or more BOPs used to ensure pressure control of a well.  A typical stack configuration has the ram BOPs on the bottom and the annular BOPs at the top.  Ram BOPs consist of two halves of a cover known as ram blocks that are forced together by hydraulic cylinders to seal the wellbore, in some cases by shearing through the drillpipe.  Annular BOPs contain a sealing element which resembles a large rubber doughnut that is mechanically squeezed inward to seal on either the drillpipe, casing or the open hole.

Casing.  Large-diameter pipe lowered into an open hole and cemented in place.

Choke. A type of valve used to control the rate and pressure of the flow of production from a well or through flowlines.

Christmas tree. An assembly of valves, pipes and fittings used to control the flow of oil and gas from a well.

Controls. A device which allows the remote triggering of an actuator to open or close a valve.

Drawworks.  The machine on the rig consisting of a large-diameter steel spool, brakes, a power source and assorted auxiliary devices. The primary function of the drawworks is to reel out and reel in the drilling line, a large diameter wire rope, in a controlled fashion.

Drilling stack. A vertical arrangement of blowout prevention equipment installed at the top of the casing at a wellhead to provide maximum pressure integrity in the event of a well control incident for drilling and completion operations.

Elastomer. A rubberized pressure control sealing element used in drilling and wellhead applications.

Manifold.  An arrangement of piping or valves designed to control, distribute and often monitor fluid flow.

Reservoir.  A subsurface body of rock having sufficient porosity and permeability to store and transmit fluids.

Riser. Pipe used to connect the wellbore of offshore wells to drilling or production equipment on the surface, and through which drilling fluids or hydrocarbons travel.

Semisubmersible.  A particular type of floating vessel that is supported primarily on large pontoon-like structures submerged below the sea surface.

Subsea tree. An assembly of valves, actuators and ancillary equipment connected to the top of the casing of a well located on the sea floor to direct and control the flow of oil and gas from the well.

Topdrive.  A device that turns the drillstring.

Valve. A device used to control the rate of flow in a line, to open or shut off a line completely, or to serve as an automatic or semi-automatic safety device.

Wellhead. The equipment installed at the surface of a wellbore to maintain control of a well and including equipment such as the casing head, tubing head and Christmas tree.
ITEM 1.
BUSINESS

Cameron International Corporation (Cameron or the Company) provides flow equipment products, systems and services to worldwide oil and gas industries through four business segments – Subsea, Surface, Drilling and Valves & Measurement (V&M).  For additional business segment information for each of the three years in the period ended December 31, 2014, see Note 16 of the Notes to Consolidated Financial Statements, which Notes are included in Part II, Item 8 of this(this “Amendment”) amends our Annual Report on Form 10-K.

10-K for the fiscal year ended December 31, 2015, originally filed on January 29, 2016 (the “Original Filing”). We are filing this Amendment to include the information required by Part III and not included in the Original Filing, as we do not intend to file a definitive proxy statement for an annual meeting of stockholders within 120 days of the end of our fiscal year ended December 31, 2015. In 1920, Jim Abercrombie, Ed Lorehn, Harryaddition, in connection with the filing of this Amendment and pursuant to the rules of the Securities and Exchange Commission (“SEC”), we are including with this Amendment new certifications of our principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Accordingly, Item 15 of Part IV has also been amended to reflect the filing of these new certifications. Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing. Material events may have occurred subsequent to the filing of the Original Filing that are not reflected in this Amendment.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

TO FORM 10-K/A

For the Year Ended December 31, 2015

Page

PART III

4

ITEM 10. Directors, Executive Officers and Corporate Governance

4

ITEM 11. Executive Compensation

11

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

32

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

34

ITEM 14. Principal Accounting Fees and Services

36

PART IV

37

ITEM 15. Exhibits

37

Signature

38

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers

Certain information concerning our executive officers is contained in the discussion entitled “Executive Officers of the Registrant” in Part I of our Form 10-K filed with the SEC on January 29, 2016.

Board of Directors

Our Board of Directors currently has eleven members and one advisory director. All of the directors were previously elected by stockholders at the 2015 Annual Meeting of Stockholders. The following information as to our directors, as of March 2, 2016, is based upon our records and information furnished to us by the directors.

Name

 

Age

 

Other Positions with
Cameron and Principal
Occupation

 

Has served as
Director since

R. Scott Rowe

 

45

 

President and Chief Executive Officer

 

2015

Jack B. Moore

 

62

 

Chairman of the Board*

 

2007

H. Paulett Eberhart

 

62

 

Former President and Chief Executive Officer of CDI Corporation

 

2013

Peter J. Fluor

 

68

 

Chairman and Chief Executive Officer of Texas Crude Energy, LLC

 

2005

Douglas L. Foshee

 

56

 

Former Chairman, President and Chief Executive Officer of El Paso Corporation

 

2008

Rodolfo Landim

 

59

 

Controlling Partner and Managing Director of Mare Investimentos S.A.

 

2011

Michael E. Patrick

 

72

 

Retired, Vice President and Chief Investment Officer of Meadows Foundation, Inc.

 

1996

Timothy J. Probert

 

64

 

Former President of Strategy and Corporate Development of Halliburton Corporation

 

2015

Jon Erik Reinhardsen

 

59

 

President and Chief Executive Officer of Petroleum Geo- Services ASA

 

2009

Brent J. Smolik

 

55

 

President, Chief Executive Officer and Chairman of the Board of Directors of EP Energy Corporation

 

2015

Bruce W. Wilkinson

 

71

 

Lead Director; Former Chairman, President and Chief Executive Officer of McDermott International, Inc.

 

2002

James T. Hackett

 

62

 

Advisory Director, Former Chairman, President and Chief Executive Officer of Anadarko Petroleum Corporation

 

2012

*Non-executive Position

R. Scott Rowe, was named Chief Executive Officer in October 2015.  He had been President and Chief Operating Officer since October 1, 2014, with responsibility for Cameron’s global operations: Subsea, Surface, Drilling, Valves and Measurement and Operational

Excellence, and prior to that he served as a Vice President for Cameron and severalChief Executive Officer for OneSubsea. He has held other partners incorporated an oilfield repair shopsignificant positions in Houston, Texas underboth Drilling and Production Systems and Valves and Measurement, including President of the nameSubsea Systems division, President of the Engineered and Process Valves division, and Vice President and General Manager of the Distributed Valves division. Mr. Rowe joined Cameron Iron Works (CIW).  Abercrombie subsequently inventedin 2002 as Corporate Development Manager.

Jack B. Moore is our current Chairman of the Board. He served as Cameron’s Chief Executive Officer from May 2008 to October 2015 and CIW manufacturedwas our President from April 2008 until October 2014.

We believe Mr. Moore’s qualifications to serve on the industry’s first blowout preventer for useBoard include his over 40 years’ experience in the oil and gas well drilling.  CIW grew rapidly dueindustry, his business acumen and leadership skills, and his deep understanding of our Company and its operations derived from nine years in the Company’s operating divisions, 7 years as our Chief Executive Officer and five years as our Chairman.

Mr. Moore is a director of KBR, Inc., a technology-driven engineering, procurement and construction company and defense services provider, and a director or Harbour Energy Ltd., a privately held upstream production company.  He serves on the board of the Petroleum Equipment Suppliers Association, where he served as Chairman of the Board, the National Ocean Industries Association, and the American Petroleum Institute.

H. Paulett Eberhart is the former President, Chief Executive Officer and director of CDI Corporation. She joined CDI Corporation in 2011 from HMS Ventures, a privately held real estate and consulting services firm where she served as Chairman and Chief Executive Officer from 2009 to salesJanuary 2011.

We believe Ms. Eberhart’s qualifications to serve on the Board include, among others, CEO and executive leadership, financial oversight responsibilities, and energy/oilfield services, international operations, and corporate governance experience.  In addition, she served as President, Americas, Senior Vice President, and President of blowout preventersSolutions Consulting at Electronic Data Systems Corporation (EDS, now part of Hewlett-Packard Company), an information technology and other business process outsourcing company, where she held multiple senior-level financial and operational roles, including four presidencies during her 26 years at EDS.

Ms. Eberhart is a director of Anadarko Petroleum Corporation, an exploration and production company; Ciber, Inc., a global information technology consulting, services and outsourcing company; and LPL Financial Holdings Inc., a financial advisory and research firm. She is a former director of CDI Corporation, Advanced Micro Devices, Inc., a designer and integrator of technologies powering intelligent devices, and Fluor Corporation, a provider of engineering, procurement, construction, maintenance, and project management.

Peter J. Fluor is Chairman of the Board and Chief Executive Officer of Texas Crude Energy, LLC, a private, independent oil and gas exploration company.  Mr. Fluor has been employed by Texas Crude Energy, LLC since 1972 in positions of increasing responsibilities, including President and Chief Financial Officer.

We believe Mr. Fluor’s qualifications to serve on the Board include, among others, CEO and executive leadership, financial oversight responsibilities, and energy/oilfield equipment.  Inservices, international operations, and corporate governance experience.  He offers the early 1940’s, CIW enteredperspective of an experienced leader and executive in the market for defense-related equipment becomingenergy industry.

Mr. Fluor is a major supplierdirector of anti-submarineFluor Corporation, a provider of engineering, procurement, construction, maintenance and other naval armaments toproject management, and is currently its Lead Independent Director. He is also a director of Anadarko Petroleum Corporation and a former director of Devon Energy Corporation, both exploration and production companies.

Douglas L. Foshee is currently the owner of Sallyport Investments, LLC, a private investment firm.  He was the Chairman and Chief Executive Officer of El Paso Corporation, formerly a natural gas and pipeline company, and a director of El Paso Pipeline GP Company, L.L.C., the general partner of El Paso’s publicly traded master limited partnership, El Paso Pipeline Partners, L.P., until May 2012 when El Paso was acquired by Kinder Morgan, Inc.  He also served as a Trustee of AIG Credit Facility Trust, overseeing the U.S. Navy.  CIW also became a leading supplier of forged metal productsgovernment’s equity interest in American International Group for both defense and oilfield applications replacing less durable cast metal componentsthe benefit of the day.  CIW subsequently expanded into various other flow control, valveU.S. Treasury, and pressure control equipment businesses acquiring Joy Petroleum Equipment and McEvoy-Willis wellhead equipment prior to its acquisition by Cooper Industries, Inc. in 1989.


Cameron was incorporated in its current form as a Delaware corporation on November 10, 1994, when Cooper Industries transferred allChairman of the assetsFederal Reserve Bank of Dallas, Houston Branch.

We believe Mr. Foshee’s qualifications to serve on the Board include, among others, CEO and liabilitiesexecutive leadership, financial oversight responsibilities, and energy/oilfield services, international operations, and corporate governance experience.  He provides significant experience in the oil and gas industry and a significant depth of its Petroleumfinancial and Industrial Equipment segment into this new entity.  Following this,corporate governance knowledge. He has held leadership and executive positions in the Company operated as a wholly-owned subsidiaryoilfield services sector, in which Cameron competes, and in finance.

Rodolfo Landim is the Controlling Partner and Managing Director of Cooper Industries from 1994 until June 30, 1995, when it was spun-off as a separate stand-alone company and renamed Cooper Cameron Corporation.  The Company subsequently changed its name to Cameron International Corporation in May 2006.  Since becoming a stand-alone company, Cameron has made numerous acquisitions, including the 1996 acquisition of Ingram Cactus Company, the 1998 acquisition of Orbit Valve International, Inc., 2004’s acquisition of Petreco International, Inc., the purchase of substantially all of the businesses within the Flow Control segment of Dresser, Inc. in 2005, the acquisition of NATCO Group Inc. (NATCO) in 2009, the purchase of LeTourneau Technologies Drilling Systems, Inc. in 2011 and the acquisition of the TTS Energy Division from TTS Group, ASA in 2012.  In 2013, Cameron and Schlumberger Limited joined together to form OneSubseaMare Investimentos S.A., a private equity and venture establishedcapital firm that seeks to manufacture and develop products, systemsinvest in supply chain goods and services for the subsea oil and gas market.  Cameronsector in Brazil, and Partner and Chief Executive Officer of Ouro Preto Oleo e Gas, a Brazilian oil and gas company integrating business strategy and technical expertise to Brazil’s exploration sector.

We believe Mr. Landim’s qualifications to serve on the Board include, among others, executive leadership, financial oversight responsibilities, international operations, and corporate governance experience.  He provides extensive experience in the oil and gas industry, particularly within the oilfield service sector. He has held leadership and executive positions in several Brazilian entities for over 30 years.

Michael E. Patrick served, until his retirement in 2010, as the Vice President and Chief Investment Officer of Meadows Foundation, Inc., a philanthropic association.

We believe Mr. Patrick’s qualifications to serve on the Board include, among others, executive leadership, financial oversight responsibilities, and energy/oilfield services and corporate governance experience.

Mr. Patrick is the founder and a principal of VestU, LLC, a web-based provider of investment education and a former director of BJ Services, an oilfield service company acquired by Baker Hughes International in 2010, and Apptricity Corporation, which provides enterprise applications and services used to automate financial management, advanced logistics, supply chain, and workforce management.

Timothy J. Probert is a 60% ownerSenior Advisor to First Reserve, a global private equity investment firm exclusively focused on energy. During 2014, Mr. Probert served as Strategic Advisor to the Chief Executive Officer of Halliburton and managerwas a member of OneSubsea.  Cameron hasHalliburton’s Executive Committee. Prior to that he served as its President of Strategy & Corporate Development from 2011 to 2014 during which time he also sold variousdirected Halliburton’s global technology portfolio. Prior to that, he was President of Halliburton’s Global Business Lines, responsible for overseeing both Halliburton operating divisions from 2010 to 2011. Earlier in his career with Halliburton, he was President of Drilling & Evaluation Division.

We believe Mr. Probert’s qualifications to serve on the Board include, among others, executive leadership, financial oversight responsibilities, over 30 years industry experience in the energy/oilfield services sector and international operations, duringand corporate governance experience.

Mr. Probert is a director of True Oil LLC, a privately owned company with interests in the time itoil and gas industry and Hoover Solutions, a privately owned company providing liquid handling solutions to the energy, petrochemical and other industries. He is a former director of El Paso Corporation, formerly a natural gas and pipeline company, and a former director of Core Laboratories, a provider of reservoir description and reservoir management services.

Jon Erik Reinhardsen is President and Chief Executive Officer of Petroleum Geo-Services ASA (PGS), a company headquartered in Oslo, Norway, that provides a broad range of products to help oil companies find oil and gas reserves offshore worldwide, including seismic and electromagnetic services, data acquisition, processing, reservoir analysis/interpretation and multi-client library data.

We believe Mr. Reinhardsen’s qualifications to serve on the Board include, among others, CEO and executive leadership, financial oversight responsibilities, and energy/oilfield services, international operations, and corporate governance experience.  His expertise with large-scale offshore projects while serving in executive positions with PGS and Aker Kvaerner, similar in scope and complexity to Cameron’s, is extremely helpful in Cameron’s evaluation and execution of its subsea systems projects.

Mr. Reinhardsen serves on the boards of AWilhelmsen Management AS, a privately owned investment company located in Oslo, Norway with holdings in shipping, retail, real estate, cruise vacations, and financial investments and Telenor ASA, a Norwegian multinational telecommunications company headquartered in Fornebu, Norway and publicly listed on the Oslo Stock Exchange. He is a former director of Höegh LNG Holdings Ltd. and Höegh Autoliners Holding AS.

Brent J. Smolik has been President, Chief Executive Officer and Chairman of the Board of Directors of EP Energy Corporation, a stand-aloneNorth American oil and natural gas exploration and development company, includingsince August 2013.  He previously served as Chairman of the Board of Managers of EPE Acquisition from May 2012 to August 2013. Prior to that, he was Executive Vice President and a member of the Executive Committee of El Paso Corporation since November 2006.

We believe Mr. Smolik’s qualifications to serve on the Board include, among others, his deep knowledge of the exploration and production business, CEO and executive leadership, financial oversight responsibilities, international operations, and corporate governance experience.

Mr. Smolik also serves on the boards of the American Exploration and Production Council and Producers for American Crude Oil Exports.

Bruce W. Wilkinson serves as Cameron’s Lead Director. He was the Chairman, President and Chief Executive Officer of McDermott International, Inc., a leading global engineering and construction company from 2000 to 2008.

We believe Mr. Wilkinson’s qualifications to serve on the Board include, among others, CEO and executive leadership, financial oversight responsibilities, and energy/oilfield services, international operations, and corporate governance experience.  In addition to his knowledge of the oilfield services sector and governance matters affecting public corporations, Mr. Wilkinson’s familiarity with the large-scale, complex projects undertaken by McDermott is

valuable to Cameron’s evaluation and execution of its Reciprocating Compression businesssubsea systems projects, which carry similar challenges of scope and complexity.

He serves on the Board of Directors of PNM Resources Inc., a holding company of utilities based in June 2014New Mexico.

Advisory Director

James T. Hackett was a director from 2012 to 2015 when he became an advisory director.  He is a partner with Riverstone Holdings LLC, a private energy investment firm. He served as Executive Chairman of the Board of Anadarko Petroleum Corporation, one of the world’s largest independent oil and natural gas exploration and production companies from 2012 to 2013. Prior to that, Mr. Hackett served as Anadarko’s Chief Executive Officer from 2003 and Chairman of the Board from January 2006 to 2012. He also served as Anadarko’s President from 2003 to 2010.

Mr. Hackett is a director of Fluor Corporation and Enterprise Products Partners, LP, both Fortune 500 companies. He also serves on the Board of a closed investment fund traded on the London Stock Exchange called Riverstone Energy Ltd. He is a former director of Halliburton Company and the former Chairman of the Board of the Federal Reserve Bank of Dallas.

Meetings and Meeting Attendance

The Board and its Centrifugal Compression business,Committees meet throughout the year on a set schedule, and also hold special meetings and act by written consent from time to time as appropriate. Board and Committee agendas include regularly scheduled executive sessions for the independent directors to meet without management present. The Board’s Lead Director leads the executive sessions of the Board, and the Committee Chairs lead those of the Committees. The Board has delegated various responsibilities and authority to the Board Committees as described in this Form 10-K/A. Committees regularly report on their activities and actions to the full Board. Board members are permitted access to all of our employees outside of Board meetings. Board members periodically visit Cameron sites and events worldwide and meet with local management of those sites and at events.

During 2015, our Board of Directors held twelve meetings; the Audit Committee held seven meetings; the Compensation Committee held six meetings; and the Nominating and Governance Committee held four meetings. Attendance for all such meetings was 97%. Each director is expected to make a reasonable effort to attend all meetings of the Board, all meetings of the Committees of which closed effective January 1, 2015.  Today, Cameronsuch director is a Fortune 500 companymember, and our annual meeting of stockholders. All of our directors, except Mr. Landim, attended our 2015 Annual Meeting of Stockholders.

Audit Committee

The Board of Directors maintains a standing Audit Committee. The Audit Committee has been established in accordance with annual revenues of more than $10 billion and a workforce of over 28,000 employees.  Cameron also has legal entities in more than 50 countries worldwide.


The common stock of Cameron trades on the New York Stock Exchange under the symbol “CAM”.  The Company’s Internet address is www.c-a-m.com. General information about Cameron, including its Corporate Governance Principles, charters for the committeesSection 3(a)(58)A of the Company’s board of directors, Code of Conduct, and Codes of Ethics for Management Personnel, including Senior Financial Officers, and Directors, can be found in the Governance and Compliance sections of the Company’s website. The Company makes available on its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended, (theand is currently comprised of Ms. Eberhart (Chair), Mr. Foshee, Mr. Patrick and Mr. Probert.  Our Audit Committee operates under a written charter approved by the Board, which is available on our website, www.c-a-m.com.

Each of the current members of the Audit Committee meets the enhanced standards for the independence of audit committee members under SEC rules and New York Stock Exchange Act)listing standards, and is financially literate, as soon as reasonably practicable afterrequired of audit committee members by the Company electronically filesNew York Stock Exchange. The Board has determined that Ms. Eberhart, Mr. Foshee and Mr. Patrick are audit committee financial experts.

The Audit Committee assists the Board in its oversight of the following matters:

·      Integrity of our accounting and financial reporting processes and audits of our financial statements, which is more fully described under the caption “Report of the Audit Committee”;

·      Our policies and processes with respect to risk assessment and risk management, and particularly our management of major financial risk exposures;

·      Our compliance with applicable legal and regulatory requirements;

·      Qualifications and independence of our independent registered public accounting firm, or furnishes themthe outside auditors; and

·      Performance of our internal audit function and outside auditors.

For a full description of the Audit Committee’s role and particularly its duties and powers, please see the Audit Committee’s Charter available on our website.

Compensation Committee

The Compensation Committee is responsible for the compensation plans and decisions for all our executive officers. Prior to making its compensation decisions regarding the CEO, the Compensation Committee is provided the performance review of the CEO conducted annually by the Nominating and Governance Committee and confers with other independent directors in Executive Session. The Compensation Committee also reviews and approves the compensation of the other executive officers, and, in addition, oversees compensation programs for non-executive officers and employees and supervises and administers our compensation and benefits policies and plans. The Compensation Committee assists the Board in making decisions regarding compensation arrangements and benefit programs for our non-employee director compensation program by considering and making recommendations to the United States SecuritiesBoard. The Compensation Committee is assisted in these matters by an independent compensation consultant, hired by and serving at the pleasure of the Committee.

A description of the Committee’s role in determining executive compensation, including the CEO’s compensation, and its use of an independent compensation consultant, is contained in the “Executive Compensation — Compensation Discussion and Analysis” portion of Item 11 of this Form 10-K/A.  A description of the Committee’s role in determining non-employee director compensation is contained under the caption “Director Compensation.”

The Compensation Committee also oversees executive development and succession planning, though sharing the responsibility for succession planning for the CEO with the Nominating and Governance Committee.

Nominating and Governance Committee

The Nominating and Governance Committee is responsible for, among other things, overseeing the development and periodic review of our policies and practices relating to corporate governance, including our Corporate Governance Principles, and for monitoring compliance with corporate governance rules and regulations, including our Code of Ethics for Directors and our Policy on Related-Person Transactions, and serves as our nominating committee. The Nominating and Governance Committee annually reviews the performance of the CEO, and assists the Board with succession planning for the CEO position. The Nominating and Governance Committee is responsible

for reviewing and recommending to the Board director nominees, recommending committee assignments and leading the conduct of annual evaluations of the Board and its Committees and individual directors.

Board’s Role in Risk Oversight

Our Board has and exercises ultimate oversight responsibility with respect to enterprise risk assessment and to the management of the strategic, operational, financial and legal risks facing our company and its operations and financial condition. The Board is involved in setting our business and financial strategies and establishing what constitutes the appropriate level of risk for us and our business segments. Various committees of the Board provide assistance to the Board in its oversight of, among other things, risk assessment and risk management.

·Our Audit Committee assists the Board in its oversight of our policies relating to risk assessment and risk management generally, with particular focus on our management of major financial risk exposures. The Audit Committee monitors the process by which risk assessment and management is developed and implemented by management and reported to the full Board.

·Our Compensation Committee assists the Board in assessing the nature and degree of risk that may be created by our compensation policies and practices to ensure both their appropriateness in terms of the level of risk-taking, and consistency with our business strategies. In conjunction with its assessment, the Committee, with the assistance of Frederick W. Cook & Co. Inc. (“FWC”), its independent compensation consultant, reviews our compensation policies and practices. That review encompasses each of our incentive plans, eligible participants, performance measurements, parties responsible for certifying performance achievement, and sums that could be earned. The Compensation Committee determined at its February 2016 meeting that our compensation policies and practices do not encourage or create an inappropriate level of risk-taking.

·Our Nominating and Governance Committee provides assistance in the oversight of, among other things, compliance risks, particularly through the oversight of the development of our compliance programs, policies and procedures, as well as through the periodic review of their effectiveness.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Commission (the SEC).  Information filed by the CompanyAct requires our directors and executive officers, and persons who own more than ten percent of our Common Stock, to file with the SEC is also available at www.sec.gov or may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  Information regarding operationsNYSE initial reports of beneficial ownership on Form 3 and changes in such ownership on Forms 4 and 5. Based on a review of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.


Any referencecopies of such reports, or written representations that no other reports were required, all Section 16(a) filing requirements applicable to Cameron, its segments or other businesses within this Form 10-K as being a leader, leading provider, leading manufacturer, or having a leading position is based on the amount of equipment installed worldwide and available industry data.
Markets and Products

Subsea Segment

The Subsea segment delivers integrated solutions, products, systems and services to the subsea oil and gas market, including integrated subsea production systems involving wellheads, subsea trees, manifolds and flowline connectors, subsea processing systems for the enhanced recovery of hydrocarbons, control systems, connectors and services designed to maximize reservoir recovery and extend the life of each field.  The Subsea segment includes the operations of OneSubsea™, a business jointly owned by Cameron (60%) and Schlumberger (40%).  Products and services are marketed products under the Cameron®, Mars, McEvoy® and Willis® brand names through a worldwide network of sales and marketing employees, supported by agents in some international locations.  The Company’s  custom  process systems products are marketed under the Cameron®, Consept, Cynara®, Hydromation®, KCC, Metrol®, Mozley, NATCO®, Petreco®, Porta-test®, Unicel, Vortoil® and Wemco® brand names.  Due to the technical nature of many of the products offered and the complexity of the subsea field layouts and designs, the marketing effort is further supported by a staff of engineering employees.

On January 6, 2015, the Company announced the execution of definitive agreements between OneSubsea, Helix Energy Solutions Group, Inc. and Schlumberger for a non-incorporated alliance formed to develop technologies and to deliver equipment and services designed to provide customers with more cost effectiveour directors, officers and more efficient subsea well intervention solutions, particularly for deep and ultra-deepwater basins and high well pressure environments.

Surface Segment

Cameron’s Surface segment designs and manufactures complete wellhead and Christmas tree systems for onshore and offshore topside applications – from conventional to high-pressure, high temperature systems, to specialized systems for dry completions and heavy oil.  The Surface segment,than 10% beneficial owners were complied with its extensive global installed base of equipment, is the industry’s largest provider of surface completion and production equipment and has a large services footprint in each of its served markets.  A complete portfolio of API 6A valves, chokes, actuators and artificial lift technologies is marketed primarily to oil and gas operators under the Cameron®, Camrod, IC, McEvoy®, Precision, SBS, Tundra, Willis® and WKM® brand names.

One of the major services provided by the Surface segment is CAMSHALE™ Production Solutions, which specializes in shale gas production.  In this process, intense pressure from fracing fluid (usually a mixture of water and sand) is used to crack surrounding shale.  Once the fractures are made, the water is removed from the well bore and the sand is left behind to hold the fractures open.  Oil and natural gas then moves out of the fractures, into the well bore, and up to the surface.

New technology developments and increased market penetration, along with robust customer spending in recent years for exploration and production, particularly within unconventional resource regions of North America, has resulted in increased demand for the Company’s equipment and services.  As a result, the Surface segment achieved growth in both orders and revenues during each of the last three years covered by this Annual Report.

Drilling Segment

The Drilling segment of Cameron is one of the leading global suppliers of integrated drilling systems for onshore and offshore applications to shipyards, drilling contractors, exploration and production companies and rental tool companies. Drilling equipment designed and manufactured includes ram and annular BOPs, control systems, drilling risers, drilling valves, choke and kill manifolds, diverter systems, topdrives, drawworks, mud pumps, pipe handling equipment, other rig products and parts and services. The products are marketed by a staff of sales and marketing employees supported by an engineering group under the Cameron®, Guiberson, H&H CUSTOM, H&H Melco, LeTourneau®, Lewco®, OEM®, Sense and Townsendbrand names.

The Drilling segment significantly enhanced its product offerings to its customers with the late 2011 acquisition of LeTourneau Technologies Drilling Systems, Inc. (LeTourneau) from Joy Global Inc., and the mid-2012 acquisition of TTS Energy Division from TTS Group ASA, a Norwegian company (TTS).  LeTourneau provides drilling equipment and rig designs and components for both the land and offshore rig markets.  LeTourneau’s products include elevating systems, skidding systems, cranes, topdrives, rotary tables, drawworks, mud pumps and rig control and power systems.  TTS provides high performance drilling equipment, rig packages and rig solutions for both onshore and offshore rigs internationally.
Cameron’s Drilling segment continues to be a primary supplier of BOPs and related equipment to the drilling industry.  The level of major project awards for new drilling equipment is often influenced by construction cycles for new build deepwater drillships and semi-submersibles, as well as shallow water jack-up rigs.  In recent years, the level of such awards was strong during the 2006 – 2008 and 2011 – 2012 time periods but has tapered off in 2013 and 2014 as the supply of rigs is currently exceeding demand.

Tighter regulations for the industry and an increased focus on safety have caused drilling contractors and operators, both on land and in deepwater environments, to turn to original equipment manufacturers (OEMs) for service, equipment repair and related parts, in many cases to re-certify BOP stacks back to OEM specifications or for new equipment to replace an aging fleet.  This has led to increased demand for the Company’s services and for additional drilling stacks, BOP’s and related equipment for use as spares to supplement or replace existing equipment currently in use.  The Company has continued to experience strong demand for parts and services in 2014 and 2013 despite the drop off in major new project awards.

Valves & Measurement Segment

The V&M segment includes businesses that provide valves and measurement systems primarily used to control, direct and measure the flow of oil and gas as they are moved from individual wellheads through flow lines, gathering lines and transmission systems to refineries, petrochemical plants and industrial centers for processing. Equipment used in these environments is generally required to meet demanding standards set by the American Petroleum Institute and the American Society of Mechanical Engineers.

Products include gate valves, ball valves, butterfly valves, Orbit® brand rising stem ball valves, double block & bleed valves, plug valves, globe valves, check valves, actuators, chokes and parts and services, as well as measurement products such as totalizers, turbine meters, flow computers, chart recorders, ultrasonic flow meters and sampling systems.

This equipment and the related services are marketed through a worldwide network of combined sales and marketing employees, as well as distributors and agents in selected international locations. Due to the technical nature of many of the products, the marketing effort is further supported by a staff of engineering employees.  Customers include oil and gas majors, independent producers, engineering and construction companies, pipeline operators, drilling contractors and major chemical, petrochemical and refining companies.

The product lines included in this segment are as follows:

Distributed Valves –

Distributed valves are used in the exploration, production and transportation of oil and gas, with products historically sold through a network of wholesalers and oilfield supply distributors, primarily in North America and to upstream markets in Asia-Pacific and the Middle East.  In order to expand the Company’s downstream industrial valve offerings, Douglas Chero, a forged gate, globe and check valve manufacturer located in Italy, was acquired during 2013.

Although demand for distributed valves was strong during much of 2014, order rates decreased in the fourth quarter of 2014 as compared to the third quarter of 2014 reflecting the weakening in commodity prices and activity levels during the latter half of the year.

Distributed valves are marketed under the brand names AOP, Demco®, Douglas Chero, Dynatorque, Maxtorque, Navco®, Newco®, Nutron®, OIC®, Techno, Texstream, Thornhill Craver®, Wheatley® and WKM®.

Engineered Valves –

Engineered valves include a full range of highly customized ball, gate and check valves serving the oil and gas production, pipeline, subsea and liquefied natural gas (LNG) markets. Products are marketed under the brand names Cameron®, Entech, Grove®, Ledeen, Ring-O®, TK®, Tom Wheatley® and WKM®.  Demand for engineered valves has historically been affected by the scope and timing of large development and infrastructure projects involving long lead times.
Process Valves –

Process valves are sold under the brand names of General Valve®, Orbit® and TBV for use in critical service applications that are often subject to extreme temperature conditions, particularly in refinery, power generation (including nuclear), chemical, petrochemical, gas processing and liquid storage terminal markets, including LNG.

Measurement Systems –

The V&M segment also designs, manufactures and distributes measurement products, systems and solutions to the global oil and gas, process and power industries. Brand names for these products include Barton®, Caldon®, Clif Mock, Jiskoot, Linco and Nuflo.

Services –

In addition to the above, V&M provides preventative maintenance, OEM spare parts, repair, field service, asset management and remanufactured products for valves and actuators through service centers situated in strategic locations around the world.

Market Issues

The success of hydraulic fracturing activities in recent years has led to increased supplies of oil and natural gas in North America.  This, combined with various other factors such as, (i) continued strong production levels from the Organization of Petroleum Exporting Countries (OPEC) and certain other resource-rich countries, (ii) current weakness in world demand for petroleum due to slowing economic growth in certain regions, and (iii) the strong U.S. dollar, in which a significant portion of world trade in petroleum products occurs, has contributed to a decline in commodity prices which began during the latter half of 2014, and has continued into early 2015.  While market activity was generally strong for the first nine months of 2014, activity levels began to weaken toward the end of the year as a result of the decline in commodity prices.  We believe these declines in commodity prices will reduce market activity levels in 2015, which will lower the demand for our products and services.  Although the Company has a substantial backlog of work that is scheduled to be executed during 2015, weaker demand for our products and services is expected to have an adverse impact on new orders, revenues and earnings.  Based on the Company’s long history in the energy sector, we believe such declines in commodity prices and demand are cyclical in nature.  During such cyclical downturns, we take steps to adjust our commercial, manufacturing and support operations as appropriate to ensure that the Company remains competitive and financially sound.  The Company cannot predict the timing of improvement in market conditions.

Cameron continues to be one of the leaders in the global market for the supply of petroleum production equipment. Cameron believes that it is well-positioned to serve these markets, even during downturns. Plant and service center facilities around the world in major oil and gas producing regions provide broad market coverage. Information relating to revenues generated from shipments to various geographic regions of the world is set forth on page 2 of “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Cameron International Corporation” included in Part II, Item 7 of this Annual Report on Form 10-K and incorporated herein by reference.

The market beyond North America continues to be important to Cameron, accounting for nearly 64% of Cameron’s revenues for the year ended December 31, 2014, up from 61% in 2013 and 55% in 2012.   The desire to expand oil and gas resources and transmission capacity in developed and developing countries, for both economic and political reasons, continues2015, except, 1) Form 3s were required to be filed for Hunter Jones and Stefan Radwanski to report holdings on Form 3 on June 10, 2016, but were filed on June 12, 2016 due to processing delays in obtaining SEC filing codes, 2) Mr. Radwanski filed a major factor affecting market demand.  ProductionForm 4 on July 9, 2015 reporting the acquisition of 17 shares through the Non-qualified Deferred Compensation Plan on June 12 and service facilities in NorthJune 26, 2015, and South America, Europe, Asia, the Middle East3) Form 5s for 2015 were required to be filed for Peter Fluor to report three transactions and West Africa provide the Company with the abilityBrent Smolik to serve the global marketplace.

As a result of tighter regulations for the industry in recent years and an increased focus on safety, the Company has experienced increased demand in its Drilling segment to service and, in many cases, re-certify existing BOP stacks back to original OEM specifications.  The Company believes this trend by operators to use OEM’s to service their equipment will continue in the near future.

Also, based upon the Company’s broad portfolio of products, Cameron has a significant presence in the offshore oil and gas drilling, production and infrastructure market.  The Company provides drilling equipment packages for drilling rigs, drilling and production risers, subsea production systems, oil and gas separation equipment, chokes, valves and other equipmentreport two transactions pursuant to the offshore market.  Approximately 62% of the Company’s 2014 revenue was derived from the offshore market (51% in 2013).
Cameron is also a significant participant, through its OneSubsea venture with Schlumberger, in serving the subsea systems projects market.  This market is significantly different from the Company’s other markets since subsea systems projects are significantly larger in scope and complexity, in terms of both technical and logistical requirements. Subsea projects (i) typically involve long lead times, (ii) typically are larger in financial scope, (iii) typically require substantial engineering resources to meet the technical requirements of the project and (iv) often involve the application of existing technology to new environments and in some cases, new technology. The Company’s OneSubsea business has a backlog of approximately $2.7 billionDeferred Compensation Plan for subsea systems projects at December 31, 2014.  To the extent the Company experiences unplanned difficulties in meeting the technical and/or delivery requirements of the projects, the Company’s earnings or liquidity could be negatively impacted.  For additional information, see the Company’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Cameron International Corporation” included in Part II, Item 7 of this Annual ReportNon-employee Directors that should have been reported on Form 10-K and incorporated herein by reference.

The creation4.

Code of OneSubsea in 2013 allows the Company to bring together Schlumberger’s expertise in subsea processing and platform integration with Cameron’s capabilities in subsea equipment to provide customers with the ability to greatly increase their subsea reservoir recovery rates.


Also, see Part I, Item 1AEthics for a discussionDirectors, Code of other risk factors, someEthics for Senior Financial Officers, Code of which are market related, that could affect the Company’s financial condition and future results.

NewConduct Product Development

For the years ended December 31, 2014, 2013 and 2012, research and product development expenditures, including amounts incurred on projects designed to enhance or add to its existing product offerings, totaled approximately $128 million, $83 million and $63 million, respectively.  The Subsea segment accounted

Our Code of Ethics for 58%, 44% and 47% of each respective year’s total costs.


On January 6, 2015, the Company announced the execution of definitive agreements between OneSubsea, Helix Energy Solutions Group, Inc. and Schlumberger for a non-incorporated alliance formed to develop technologies and to deliver equipment and services designed to provide customers with more cost effective and more efficient subsea well intervention solutions, particularly for deep and ultra-deepwater basins and high well pressure environments.

Working with numerous universities around the world through the Company’s Sustainability Business Model, the Company was able to commercialize the EVERMAX™ lubricant in 2013.  Formulated as a grease, EVERMAX features nanotechnology additives which reduce friction by orders of magnitude over traditional lubricants.  The Company expects this product to provide significant improvements in operating efficiency and wear reduction in Cameron’s ball valve products as well as BOPs and gate valve applications.

Cameron has also provided funding for university research in both the United States and Brazil for the development of advanced materials that dampen vibration that could be caused by ocean currents in subsea environments.  Cameron's researchers have also worked with a variety of technical partners around the world in developing elastomer seals that perform better in low temperature, high pressure environments.

OneSubsea continues to focus on new technology development in areas such as Life of Field services, Processing, Controls, Optimization and High Pressure and High Temperature applications and in the integration of subsea and subsurface technologies to increase recovery and lower intervention costs.  As example, in 2014 OneSubsea delivered a subsea multiphase meter with an innovative conductivity probe that allows for the determination of water in gas or oil down to the parts-per-million (PPM) level or to detect changes in water salinity.  Additionally, three innovative subsea sampling solutions were delivered to clients in various parts of the world.  Similarly, testing was completed on a 3.8Mw high-pressure subsea multiphase boosting pump to the satisfaction of, and support from, several Oil and Gas Operators.  Finally, as discussed above, OneSubsea entered into an alliance with Schlumberger and Helix Energy Solutions that will deliver to the market efficient and cost-effective light well intervention technologies.

Additionally, Cameron continues to improve its CO2 membrane technology.  The Cynara PN-1 membrane product was released in 2012 with enhanced separation characteristics for high volume gas applications.  This resulted from a joint development effort between Cameron and Petronas and was recently selected for a large gas processing plant in Southeast Asia.
Another new CO2 membrane will be released in 2015 with capabilities to handle higher natural gas pressures and lower CO2 concentrations, which initially will be marketed for on-shore gas processing applications.  This technology is an alternative to amine systems in many applications, with significant lower operating cost, modular construction and smaller footprint.

The monoethylene glycol (MEG) reclamation technology is a continued focus for product improvement and enhancement.  The latest generation of Cameron’s brine displacement solution was launched in 2013 as PureMEG®.  The latest developments include divalent salt removal systems and improved salt management processes. These enhancements are targeted to provide better reliability and OPEX.

In 2014, Cameron began offering the Bilectric©HF, which combines our established Bilectric desalting product with the performance enhancements achieved by our Dual Frequency® power units.  This hybrid of two established technologies will provide producers and refiners with options to upgrade existing installations for improved throughput, performance or chemical optimization.

The CDX Compact Deaeration technology will be launched in 2015.  This packed bed reactor solution will provide substantial space and weight savings as compared to traditional vacuum deaeration solutions utilized offshore for seawater flooding.  This is the result of a 3 year development that is in the final stage of field demonstration testing.

Over the last three years, Cameron’s Surface segment has developed a number of products to serve the hydraulic fracturing (frac) market.  The F-T90 horizontal frac tree is ultra-compact in design to reduce frac stack height.  In 2014, Cameron expanded the F-T90 fleet to include 5” 15,000-psi trees in both Canada and the U.S.   The Monoline™ Frac Fluid Delivery System (FFDS) eliminates a significant number of frac iron connections, eliminates the need for expensive safety strapping, reduces footprint and reduces wellsite clutter for added safety benefits. Cameron’s rotating casing hanger facilitates running the casing string in highly deviate wells, reducing both rig time and the risk of stuck pipe.  The tension hanger designed by Cameron allows for the tubing string to be pulled straighter on completion to allow for artificial lift solutions that are required later for almost all shale wells.  To address the needs of maturing frac wells, Cameron’s Surface Systems Engineering group has improved the CAMLIFT™ 30-120, CAMLIFT 30-144 and the CAMLIFT 40-192 systems to extend seal life by reducing the hammering effects in the system.  This has improved operators’ uptime and significantly exceeds the uptime average for artificial lift wells.  Throughout the life of the frac wells, the new CAM20-MT Interchanger Multi-Trim choke is a cost-effective solution that allows fast actuated adjustments to keep up with changing well conditions and is designed for fast and easy replacement of internals if they get damaged by sand or proppant.

During 2011, the Company’s Drilling segment delivered the industry’s first and only 13⅝” 25,000-psi BOP stack for use in a high-pressure application in the Gulf of Mexico.  Currently, the Company has on order a second 25,000-psi BOP stack and a 25,000-psi manifold which is expected to be delivered in 2015.  Previously, in another first, the Drilling segment had introduced an 18¾” 20,000-psi BOP stack in 2009, which had the characteristics of reduced height and weight found in the EVO® BOP that was introduced in 2007 as a compact, lighter version of Cameron’s traditional subsea BOP.  Also during 2008, the Company introduced the Sea Pressure Accumulator (SPA), a complement to the EVO BOP, which uses seawater pressure instead of traditional nitrogen-charged accumulator bottles to power the BOP rams.  In 2012, Cameron developed a derivative system of SPA called Sea Pressure Reduction Assembly (SPRA), which reduces hydrostatic seawater effects on the EVO BOP operating system.  This, in turn, makes more efficient use of existing accumulator capacity.  Another highlight of 2012 was the development of the stab-in connection system (STiCS).  The STiCS provides an automated means of safely and quickly connecting heavy choke and kill hoses to the riser slip joint which saves hours of rig time.

The Drilling segment also introduced a number of products to the industry in 2014 including the CognitionTM Stack Instrumentation Infrastructure package and EVO® 300 Bonnet™ technology that were introduced at the Offshore Technology Conference (OTC) and the X-COM operator’s chair that was introduced at the Offshore North Seas Conference (ONS).  The Cognition package is a network of sensors, data recorders and communications on the subsea stack that provides critical information for real-time subsea stack monitoring, conditioned-based maintenance, and emergency mitigation and recovery.  The EVO 300 Bonnet is a simpler bonnet design for the EVO BOP which has an increased closing force of 54% over the previous design.  The X-COM operator’s chair improves upon the earlier chair design and incorporates added features to improve operational efficiency.

In addition, the Mark IV HA control systems and Mark IV control POD were introduced.  The Mark IV system – featuring an industry-first three-POD design option – improves operational reliability of the drilling system through redundancy and simplified POD design.  Each control POD within the system has also been improved to include 33% more available functions to accommodate eighty-cavity stacks, a 50% reduction in internal tubing to reduce leak paths, and a 26% smaller footprint than its predecessor.
Competition

Cameron competes in all areas of its operations with a number of other companies, some of which have financial and other resources comparable to or greater than those of Cameron.

Cameron has a leading position in the petroleum production equipment markets. In these markets, Cameron competes principally with Aker Solutions, Balon Corporation, Circor International, Inc., Dover Corporation, Dril-Quip, Inc., Emerson Process Management, FlowServ Corp., FMC Technologies, Inc., GE Oil & Gas Group, Master Flo (a Stream-Flo Industries Ltd. company), National Oilwell Varco Inc., PBV-USA, Inc. (a Zy-Tech Global Industries company), Petrovalve (a Flotek Industries, Inc. company), Pibiviese, Robbins & Myers Fluid Management Group, SPX Corporation’s Flow Technology Segment, Tyco International Ltd. and the Artificial Lift Systems business of Weatherford, Ltd.

The principal competitive factors in the petroleum production equipment markets are technology, quality, service and price. Cameron believes several factors give it a strong competitive position in these markets. Most significant are Cameron’s broad product offering, its worldwide presence and reputation, its service and repair capabilities, its expertise in high-pressure technology and its experience in alliance and partnership arrangements with customers and other suppliers.

Manufacturing

Cameron has manufacturing facilities worldwide that conduct a broad variety of processes, including machining, fabrication, assembly and testing, using a variety of forged and cast alloyed steels and stainless steel as the primary raw materials.  Cameron has, at various times, rationalized plants and products, closed various manufacturing facilities, moved product lines to achieve economies of scale, and upgraded other facilities.  The Company has also in recent years constructed new facilities, mainly in certain locations outside of North America, in order to meet expected future demand, particularly with regard to its drilling, surface and subsea product offerings.  This is an ongoing process as the Company seeks ways to improve delivery performance and reduce costs.  Cameron maintains advanced manufacturing, quality assurance and testing equipment geared to the specific products that it manufactures and uses process automation in its manufacturing operations.  Manufacturing facilities typically utilize computer-aided, numeric-controlled tools and manufacturing techniques that concentrate the equipment necessary to produce similar products in one area of the plant in a configuration commonly known as a manufacturing cell.  One operator in a manufacturing cell can monitor and operate several machines, as well as assemble and test products made by such machines, thereby improving operating efficiency and product quality.
Cameron’s test capabilities are critical to its overall processes. The Company has the capability to test most equipment at rated operating conditions, measuring all operating parameters, efficiency and emissions.
All of Cameron’s Asian, European and Latin American manufacturing plants are ISO certified and API licensed, and most of the U.S. plants are ISO certified. ISO is an internationally recognized verification system for quality management.

Backlog

Cameron’s backlog was approximately $9.5 billion at December 31, 2014 (approximately 60% of which is expected to be shipped during 2015), as compared to $11.1 billion at December 31, 2013, and $8.1 billion at December 31, 2012.  Backlog consists of customer orders for which a purchase order or contract has been received, satisfactory credit or financing arrangements exist and delivery is scheduled.

Patents, Trademarks and Other Intellectual Property

As part of its ongoing research, development and manufacturing activities, Cameron has a policy of seeking patents when appropriate on inventions involving new products and product improvements. Cameron owns 513 unexpired United States patents and 1,200 unexpired foreign patents. During 2014, 160 new U.S. and 282 new foreign patent applications were filed.
Although, in the aggregate, these patents are of considerable importance to the manufacturing of many of its products, Cameron does not consider any single patent or group of patents to be material to its business as a whole.
Trademarks are also of considerable importance to the marketing of Cameron’s products. Cameron considers the following trade names to be important to its business as a whole: CAMERON, WILLIS, W-K-M, NATCO and LeTourneau. Other important trademarks used by Cameron are included under “Markets and Products” above.  Cameron has registered trademarks in countries where such registration is deemed important.  Cameron has the right to use the trademark Joy on parts until November 2027.
Cameron also relies on trade secret protection for its confidential and proprietary information. Cameron routinely enters into confidentiality agreements with its employees, partners and suppliers. There can be no assurance, however, that others will not independently obtain similar information or otherwise gain access to Cameron’s trade secrets.

Employees

As of December 31, 2014, Cameron had approximately 28,000 employees, of which nearly 23% were represented by labor unions.
Over 2,300 employees are covered by union contracts which are slated to expire during 2015, the majority of which are in Italy and Romania.
Executive Officers of the Registrant

Name and AgePresent Principal Position and Other Material Positions Held During Last Five Years
Jack B. Moore (61)Chairman of the Board of Directors since May 2011.  Chief Executive Officer since April 2008.  President from January 2007 to September 2014 (during this time also held the dual title of Chief Executive Officer from April 2008 to September 2014 and Chief Operating Officer from January 2007 to March 2008).  Senior Vice President from July 2005 to December 2006.  Vice President from May 2003 to July 2005.  President, Drilling and Production Systems segment from July 2002 to December 2006.  Vice President and General Manager, Cameron Western Hemisphere from July 1999 to July 2002.  Vice President Western Hemisphere Operations, Vice President Eastern Hemisphere, Vice President Latin American Operations, Director Human Resources, Director Market Research and Director Materials of Baker Hughes Incorporated from 1976 to July 1999.
R. Scott Rowe (44)President and Chief Operating Officer since October 2014.  Vice President from August 2012 to October 2014.  Chief Executive Officer of OneSubsea from March 2014 to September 2014.  President of the Production Systems division of OneSubsea from June 2013 to February 2014.  President of the Subsea Systems division of Cameron from August 2012 to February 2014.  President of the Engineered and Process Valves division from April 2010 to August 2012.  Vice President and General Manager of the Distributed Valves division from January 2007 to May 2008.  Vice President of Operations of the Valves and Measurement divisions from August 2005 to January 2007.  Corporate Development Manager from June 2002 to August 2003.
William C. Lemmer (70)Senior Vice President and General Counsel since May 2008, Senior Vice President, General Counsel and Secretary from July 2007 to May 2008. Vice President, General Counsel and Secretary from July 1999 to July 2007. Vice President, General Counsel and Secretary of Oryx Energy Company from 1994 to March 1999.
Charles M. Sledge (49)Senior Vice President and Chief Financial Officer since November 2008.  Vice President and Chief Financial Officer from April 2008 to November 2008.  Vice President and Corporate Controller from July 2001 to March 2008. Senior Vice President, Finance and Treasurer from 1999 to June 2001, and Vice President, Controller from 1996 to 1999, of Stage Stores, Inc., a chain of family apparel stores.
Gary M. Halverson (56)President, Drilling & Production Systems since October 2013.  Senior Vice President since October 2012.  Vice President from October 2010 to October 2012.  President, Surface Systems since 2005.  Vice President and General Manager Cameron Western Hemisphere from 2003 to 2005.  General Manager of Cameron Latin America from 2001 to 2003.  Director of Sales and Marketing for Cameron Asia Pacific Middle East from 1995 to 2001.
Steven P. Geiger (61)Vice President and Chief Administrative Officer since October 2014.  Vice President, Human Resources from January 2014 to September 2014.  Vice President of Human Resources and Operational Excellence from June 2013 to December 2013. Vice President of Operational Excellence from February 2013 to June 2013.  Senior Vice President at Senn-Delaney Leadership Consulting Group from July 2008 to February 2013.  Also served as Interim Chief Operating Officer of James Cancer Hospital, Ohio State University, from January 2010 to June 2010.
Dennis S. Baldwin (54)Vice President, Controller and Chief Accounting Officer since March 2014.  Senior Vice President and Chief Accounting Officer of KBR, Inc. from August 2010 to March 2014.  Vice President and Chief Accounting Officer of McDermott International from October 2007 to August 2010.
ITEM1A.
RISK FACTORS

Factors That May Affect Financial Condition and Future Results

Downturns in the oil and gas industry have had, and will likely in the future have, a negative effect on the Company’s sales and profitability.

Demand for most of the Company’s products and services, and therefore its revenue, depends to a large extent upon the level of capital expenditures related to oil and gas exploration, development, production, processing and transmission. Declines, as well as anticipated declines, in oil and gas prices could negatively affect the level of these activities, or could result in the cancellation, modification or rescheduling of existing orders. For example, oil prices began declining during the third quarter of 2014, dropping nearly 50% from mid-year levels to approximately $53 per barrel as of December 31, 2014.  Prices have continued to decline into the mid-$40 range since year end.  Similarly, natural gas prices declined late in 2014 from the low-to-mid $4 range per MMBtu to just under $3 per MMBtu at December 31, 2014.  These declines have already begun to, and are expected to continue to, affect exploration and production activity levels and, therefore, demand for the Company’s products and services at least through 2015.  In addition to a decline in future orders and revenues, the Company may also incur additional costs as it seeks to adjust its commercial, manufacturing and support operations levels to meet expected future customer demand. See also the discussion in “Market Conditions” above for 2014 as compared to 2013.

Cancellation, downsizing or delays of orders in backlog are possible.

As described above, commodity prices have declined significantly since mid-2014 which has resulted in various oil and gas exploration and production companies announcing spending cuts or deferrals in their 2015 capital spending plans, as well as headcount reductions.  At current price levels, certain projects, particularly those in deepwater environments and unconventional resource regions, may become uneconomical for the risk involved.  Certain customers who are more highly leveraged may also experience concerns regarding future projected cash flows based on current price levels.  These factors described above could result in existing orders in backlog being cancelled, downsized or future shipment dates may be delayed, all of which could further negatively impact the Company’s future profitability.

At December 31, 2014, the Company’s backlog was approximately $9.5 billion, down 14% from December 31, 2013.  An example of a cancellation of an existing order is the reversal of $243 million of backlog during the first quarter of 2014 as the result of a customer cancellation of a large drilling project award issued in 2012.  Another example of a potential delay or downsizing of a previous awards is the announcement by Chevron in late 2013of the deferral of its Rosebank project, which was awarded in 2013 and currently accounts for $505 million of the Company’s ending backlog, in order to work with its partners to improve the project’s economics.  Although the original contract remains in place, OneSubsea is currently working with Chevron on a revised scope for the project based on a new field layout design.

The inability of the Company to deliver its backlog or future orders on time could affect the Company’s sales and profitability and its relationships with its customers.

The ability to meet customer delivery schedules on the Company’s existing backlog, as well as future orders, is dependent on a number of factors including, but not limited to, access to the raw materials required for production, an adequately trained and capable workforce, project engineering expertise for large subsea projects, sufficient manufacturing plant capacity and appropriate planning and scheduling of manufacturing resources.  Many of the contracts the Company enters into with its customers require long manufacturing lead times and contain penalty clauses relating to on-time delivery. A failure by the Company to deliver in accordance with customer expectations could subject the Company to financial penalties or loss of financial incentives and may result in damage to existing customer relationships.

Execution of subsea and drilling rig projects exposes the Company to risks not present in its other businesses.

Cameron is involved in development projects involving drilling rigs and, through our subsea business, is a significant participant in the subsea systems projects market.  These markets are different from most of the Company’s other markets since drilling rig and subsea systems projects are larger in scope and complexity, in terms of both technical and logistical requirements. Both types of projects typically (i) involve long lead times, (ii) are larger in financial scope, (iii) require substantial engineering resources to meet the technical requirements of the project and (iv) often involve the application of existing technology to new environments and, in some cases, may require the development of new technology. The Company’s Drilling business had a backlog of approximately $721 million for drilling rig equipment and the subsea business had a backlog of approximately $2.7 billion for subsea systems projects at December 31, 2014.  To the extent the Company experiences unplanned difficulties in meeting the technical and/or delivery requirements of the projects, the Company’s earnings or liquidity could be negatively impacted.  The Company accounts for its drilling and subsea projects, as it does its separation projects, using accounting rules for construction-type and production-type contracts.  Factors that may affect future project costs and margins include the ability to properly execute the engineering and design phases consistent with our customers’ expectations, production efficiencies obtained, and the availability and costs of labor, materials and subcomponents.  These factors can impact the accuracy of the Company’s estimates and materially impact the Company’s future period earnings.  If the Company experiences cost overruns, the expected margin could decline.  Were this to occur, in accordance with the accounting guidance, the Company would record a cumulative adjustment to reduce the margin previously recorded on the related project in the period a change in estimate is determined.   Drilling rig equipment and subsea systems projects accounted for approximately 9% and 14%, respectively, of total 2014 revenues.
As a designer, manufacturer, installer and servicer of oil and gas pressure control equipment, the Company may be subject to liability, personal injury, property damage and environmental contamination should such equipment fail to perform to specifications.

Cameron provides products and systems to customers involved in oil and gas exploration, development and production, as well as in certain other industrial markets.  Some of the Company’s equipment is designed to operate in high-temperature and/or high-pressure environments on land, on offshore platformspromote honest and onethical conduct and compliance with applicable laws, rules, regulations and standards. Our Board recognizes that no code of ethics can replace the seabed, and some equipment is designed for use in hydraulic fracturing operations.  Cameron also provides parts and repair services at numerous facilities located around the world, as well as at customer sites for this and other equipment.  Because of applications to which the Company’s products and services are put, particularly those involving the high temperature and/or pressure environments, a failure of such equipment, or a failure of our customer to maintain or operate the equipment properly, could cause damage to the equipment, damage to the property of customers and others, personal injury and environmental contamination, onshore or offshore, leading to claims against Cameron.

Certain of the Company’s risk mitigation strategies may not be fully effective.

The Company relies on customer indemnifications and third-party insurance as part of its risk mitigation strategy.  There is, however, an increasing reluctance of customers to provide what had been typical oilfield indemnifications for pollution, consequential losses, property damage, and personal injury and death, and a reluctance, even refusal of counterparties to honor their contractual indemnity obligations when given.  In addition,  insurance companies may refuse to honor their policies.

An example of both is the Company’s experience in the Deepwater Horizon matter.  The Company’s customer denied that it owed any indemnification under the contract with us, and when called on to participate in the Company’s settlement with BP Exploration and Production Inc., one of the seven insurers refused to provide coverage.  The Company subsequently sued its insurer and won a judgment for the full policy amount plus interest and costs, but the insurer continues to litigate the matter and has appealed the judgment.

The implementationthoughtful behavior of an upgraded business information system may disrupt the Company’s operations or its systemethical director, but such a code can focus attention on areas of internal controls.

The Company has a project underwayethical risk, provide guidance to upgrade its SAP business information systems worldwide.  The first stage of this multi-year effort was completed at the beginning of the third quarter of 2011 with the deployment of the upgraded system to the Company’s process systemshelp recognize and compression businesses.  Since then, other businesses and business functions have been migrated in stages.  As of December 31, 2014, nearly all businesses within the V&M segment, the Surface segment, the Company’s worldwide engineering and human resource functions, as well as other corporate office activities are now operating in the upgraded system.  The Drilling segment is scheduled to be migrated in 2015 and the OneSubsea business in 2016.  The Drilling segment and the OneSubsea business are major contributors to the Company’s consolidated revenues and income before income taxes.

As this system continues to be deployed throughout the Company, delays or difficulties may be encountered in effectively and efficiently processing transactions and conducting business operations, including project management, until such time as personnel are familiar with all appropriate aspects and capabilities of the upgraded systems.

A deterioration in future expected profitability or cash flows could result in an impairment of the Company’s goodwill.

Total goodwill was nearly $2.5 billion at December 31, 2014.  Due to the significant drop in commodity prices during the latter half of 2014 and the reorganization of the Company’s reporting structure, the Company made an additional evaluation of goodwill for impairment during the fourth quarter of 2014 based upon macro factors that existed at that point in time.  The fair value of our Process Systems reporting unit was estimated to be 10% to 15% higher than its carrying value as part of that evaluation.  The estimated fair value for Process Systems was based on forecasted timing and success in receiving new major project awards in 2015 and beyond, the pricing and profitability of those new awards and further improvements in revenue growth and profitability rates from those achieved historically.  Should our expectations prove to be incorrect due to (i) further declines in oil and gas prices and continued instability in the worldwide energy markets, (ii)  unanticipated delays occurring in project awards, including unplanned project cancellations, or, (iii) an increase in interest rates, our prior estimates of future earnings, cash flows and fair value of the Process Systems business would be negatively impacted, which could lead to an impairment of goodwill for that reporting unit, possibly even as early as our annual evaluation during the first quarter of 2015.  Goodwill associated with the Process Systems reporting unit at December 31, 2014 was approximately $571 million.
The Company’s operations and information systems are subject to cybersecurity risks.

Cameron continues to increase its dependence on digital technologies to conduct its operations. Many of the Company’s files are digitized and more employees are working in almost paperless environments.  Additionally, the hardware, network and software environments to operate SAP, the Company’s main enterprise-wide operating system, have been outsourced to third parties.  Other key software products used by the Company to conduct its operations either reside on servers in remote locations or are operated by the software vendors or other third parties for the Company’s use as “Cloud-based” or “Web-based” applications.  The Company has also outsourced certain information technology development, maintenance and support functions.  As a result, the Company is exposed to potentially severe cyber incidents at both its internal locations and outside vendor locations that could result in a theft of intellectual property and/or disruption of its operations for an extended period of time resulting in the loss of critical data and in higher costs to correct and remedy the effects of such incidents, although no such material incidents have occurred to date to the Company’s knowledge.

Fluctuations in currency markets can impact the Company’s profitability.

The Company has established multiple “Centers of Excellence” facilities for manufacturing such products as subsea trees, subsea chokes, subsea production controls and blowout preventers.  These production facilities are located in the United Kingdom, Brazil, Romania, Italy, Norway and other European and Asian countries. To the extent the Company sells these products in U.S. dollars, the Company’s profitability is eroded when the U.S. dollar weakens against the British pound, the euro, the Brazilian real and certain Asian currencies, including the Singapore dollar. Alternatively, profitability is enhanced when the U.S. dollar strengthens against these same currencies.  For further information on the use of derivatives to mitigate certain currency exposures, see Item 3, “Quantitative and Qualitative Disclosures about Market Risk” below and Note 19 of the Notes to Consolidated Condensed Financial Statements.

The Company’s operations expose it to risks of non-compliance with numerous countries’ import and export laws and regulations, and with various nations’ trade regulations including U.S. sanctions.

The Company’s operations expose it to trade and import and export regulations in multiple jurisdictions.  In addition to using “Centers of Excellence” for manufacturing products to be delivered around the world, the Company imports raw materials, semi-finished goods and finished products into many countries for use in country or for manufacturing and/or finishing for re-export and import into another country for use or further integration into equipment or systems.  Most movement of raw materials, semi-finished or finished products by the Company involves exports and imports.  As a result, compliance with multiple trade sanctions and embargoes and import and export laws and regulations poses a constant challenge and risk to the Company.  The Company has received a number of inquiries from U.S. governmental agencies, including the U.S. Securities and Exchange Commission and the Office of Foreign Assets Control, regarding compliance with U.S. trade sanction and export control laws, the most recent of which was received in December 2012 and replied to by the Company in January 2013.  The Company has undergone and will likely continue to undergo governmental audits to determine compliance with export and customs laws and regulations.

The United States and the European Union (EU) also recently imposed sanctions on various sectors of the Russian economy and on transactions with certain Russian nationals and entities.  These sanctions may severely limit the amount of future business the Company does with customers involved in activities in Russia.  As of December 31, 2014, approximately 1% of the Company’s backlog from continuing operations related to future deliveries to customers doing business in Russia.  Customer sales by the Company’s continuing operations into Russia during 2014 totaled less than 1% of the Company’s sales during the year.  In addition, the sanctions of the U.S. and the EU are inconsistent and neither is, as yet, well defined, both of which factors increase the risk of an unintended violation.
The Company’s operations expose it to political and economic risks and instability due to changes in economic conditions, civil unrest, foreign currency fluctuations, and other risks, such as local content requirements, inherent to international businesses.

The political and economic risks of doing business on a worldwide basis include the following:

volatility in general economic, social and political conditions;
the effects of civil unrest and, in some cases, military action on the Company’s business operations, customers and employees, such as that recently occurring in several countries in the  Middle East, in Ukraine and in Venezuela;
exchange controls or other similar measures which result in restrictions on repatriation of capital and/or income, such as those involving the currencies of, and the Company’s operations in, Angola and Nigeria; and
reductions in the number or capacity of qualified personnel.

In recent months, civil unrest and military action have increased in Iraq which may impact the ability of that country to continue to produce and export oil at current levels.  Such unrest may also jeopardize the Company’s in-country investments and on-going business activities supporting Iraq’s oil and gas production infrastructure.  At December 31, 2014, less than 1% of the Company’s backlog related to future deliveries to customers doing business in Iraq.  Additionally, less than 1% of the Company’s property, plant and equipment were located in Iraq.  The Company is also evaluating its options under the force majeure clauses of each of the major contracts with its customers doing business in Iraq in the event the current situation in that country continues to deteriorate.

Cameron also has manufacturing and service operations that are essential parts of its business in other developing countries and volatile areas in Africa, Latin America and other countries that were part of the Former Soviet Union, the Middle East, and Central and South East Asia. Recent increases in activity levels in certain of these regions have increased the Company’s risk of identifying and hiring sufficient numbers of qualified personnel to meet increased customer demand in selected locations.  The Company also purchases a large portion of its raw materials and components from a relatively small number of foreign suppliers in China, India and other developing countries. The ability of these suppliers to meet the Company’s demand could be adversely affected by the factors described above.

In addition, customers in countries such as Angola and Nigeria increasingly are requiring the Company to accept payments in the local currencies of these countries.  These currencies do not currently trade actively in the world’s foreign exchange markets.

The Company also has certain manufacturing and services operations in Venezuela that contributed $74 million in revenues during 2014.  The economy in Venezuela is highly inflationary.   As a result, the Company’s operations in Venezuela are accounted for as having a U.S. dollar functional currency and the Company considers its earnings in Venezuela to be permanently reinvested.  The Company does not currently expect a material gain or loss or a material decline in operating cash flows to occur as a result of any change in the payment practices of its primary customer or in further devaluations of the Venezuelan currency.  These factors however, along with recent civil unrest, create political and economic uncertainty with regard to their impact on the Company’s continued operations in this country.

Increasingly, some of the Company’s customers, particularly the national oil companies, have required a certain percentage, or an increased percentage, of local content in the products they buy directly or indirectly from the Company.  This requires the Company to add to or expand manufacturing capabilities in certain countries that are presently without the necessary infrastructure or human resources in place to conduct business in a manner as typically done by Cameron.  This increases the risk of untimely deliveries, cost overruns and defective products.

The Company’s operations expose it to risks resulting from differing and/or increasing tax rates.

Economic conditions around the world have resulted in decreased tax revenues for many governments, which have led and could continue to lead to changes in tax laws in countries where the Company does business, including further changes in the United States.  Changes in tax laws could have a negative impact on the Company’s future results.

The Company’s operations require it to deal with a variety of cultures, as well as agentsethical issues, and other intermediaries, exposing ithelp to anti-corruption compliance risks.

Doing business on a worldwide basis necessarily involves exposing the Company and its operations to risks inherent in complying with the laws and regulations of a number of different nations. These laws and regulations include various anti-bribery and anti-corruption laws.
The Company does business and has operations in a number of developing countries that have relatively underdeveloped legal and regulatory systems compared to more developed countries. Several of these countries are generally perceived as presenting a higher than normal risk of corruption, or as havingfoster a culture in which requests for improper payments are not discouraged. Maintainingof honesty and administering an effective anti-bribery compliance program under the U.S. Foreign Corrupt Practices Act (FCPA), the United Kingdom’s Bribery Act of 2010,accountability. Our Board members certify their commitment to and similar statutes of other nations, in these environments present greater challenges to the Company than is the case in other, more developed countries.

Additionally, the Company’s business involves the use of agents and other intermediaries, such as customs clearance brokers, in these countries as well as others.  As a result, the risk to the Company of compliance violations is increased because actions taken by any of them when attempting to conduct business on our behalf could be imputed to us by law enforcement authorities.

The Company is subject to environmental, health and safety laws and regulations that expose the Company to potential liability and proposed new regulations that would restrict activities to which the Company currently provides equipment and services.

The Company’s operations are subject to a variety of national and state, provincial and local laws and regulations, including laws and regulations relating to the protection of the environment. The Company is required to invest financial and managerial resources to comply with these laws and expects to continue to do so in the future. To date, the cost of complying with governmental regulation has not been material, but the fact that such laws or regulations are frequently changed makes it impossible for the Company to predict the cost or impact of such laws and regulations on the Company’s future operations. The modification of existing laws or regulations or the adoption of new laws or regulations imposing more stringent environmental restrictions could adversely affect the Company.

The Company provides equipment and services to companies employing hydraulic fracturing or “fracking” and could be adversely impacted by additional regulations of this enhanced recovery technique.

Environmental concerns have been raised regarding the potential impact on underground water supplies of hydraulic fracturing which involves the pumping of water and certain chemicals under pressure into a well to break apart shale and other rock formations in order to increase the flow of oil and gas embedded in these formations.  Recently, a number of U.S. states have proposed regulations regarding disclosure of chemicals used in fracking operations or have temporarily suspended issuance of permits for such operations.  The State of New York recently announced a statewide ban on hydraulic fracturing beginning in 2015 which would limit natural gas production from a portion of the Marcellus Shale region.  Additionally, the United States Environmental Protection Agency (EPA) issued rules, which became effective in January 2015, that are designed to limit the release of volatile organic compounds, or pollutants, from natural gas wells that are hydraulically fractured.  The EPA has published draft permitting guidance for oil and gas hydraulic fracturing activities using diesel fuels and is continuing to study whether the fracking process has any negative impact on underground water supplies.  Should these regulations, or additional regulations and bans by governments, restrict or curtail hydraulic fracturing activities, the Company’s revenues and earnings could be negatively impacted.

Enacted and proposed climate protection regulations and legislation may impact the Company’s operations or those of its customers.

The EPA has made a finding under the United States Clean Air Act that greenhouse gas emissions endanger public health and welfare and the EPA has enacted regulations requiring monitoring and reporting by certain facilities and companies of greenhouse gas emissions.  In June 2014, the U.S. Supreme Court prohibited the EPA from being able to require limits on carbon dioxide and other heat trapping gases from sources that would otherwise not need an air pollution permit.

Also, in June 2014, the EPA, acting under President Obama’s Climate Action Plan, proposed its Clean Power Plan, which would set U.S. state-by-state guidelines for power plants to meet by 2030 to cut their carbon emissions by 30% nationwide from 2005 levels.  The guidelines are also intended to cut pollution, nitrogen oxides and sulfur dioxide by more than 25% during the same period.  Under the Clean Power Plan, states are to develop plans to meet state-specific goals to reduce carbon pollution and submit those plans to the EPA by June 2016, with a later deadline provided under certain circumstances.  While these proposed rules may hasten the switch from coal to cleaner burning fuels such as natural gas, the overall long-term economic impact of the plan is uncertain at this point.

Carbon emission reporting and reduction programs have also expanded in recent years at the state, regional and national levels with certain countries having already implemented various types of cap-and-trade programs aimed at reducing carbon emissions from companies that currently emit greenhouse gases.
To the extent the Company’s customers are subject to these or other similar proposed or newly enacted laws and regulations, the Company is exposed to risks that the additional costs by customers to comply with such laws and regulations could impact their ability or desire to continue to operate at current or anticipated levels in certain jurisdictions, which could negatively impact their demand for the Company’s products and services.

To the extent Cameron becomes subject to any of these or other similar proposed or newly enacted laws and regulations, the Company expects that its efforts to monitor, report and comply with such laws and regulations, and any related taxes imposed on companies by such programs, will increase the Company’s cost of doing business in certain jurisdictions, including the United States, and may require expenditures on a number of its facilities and possibly on modifications of certain of its products.

The Company could also be impacted by new laws and regulations establishing cap-and-trade and those that might favor the increased use of non-fossil fuels, including nuclear, wind, solar and bio-fuels or that are designed to increase energy efficiency.  If the proposed or newly executed laws have the effect of dampening demand for oil and gas production, they could lower spending by customers for the Company’s products and services.

Environmental Remediation

The Company’s worldwide operations are subject to domestic and international regulations with regard to air, soil and water quality as well as other environmental matters. The Company, through its Health, Safety and Environmental (HSE) Management System and corporate third-party regulatory compliance audit program, believes it is in substantial compliance with these regulations.

The Company is heir to a number of older manufacturing plants that conducted operations in accordance with the standards of the time, but which have since changed.  The Company has undertaken clean-up efforts at these sites and now conducts its business in accordance with today’s standards.  The Company’s clean-up efforts have yielded limited releases of liability from regulators in some instances, and have allowed sites with no current operations to be sold.  The Company conducts environmental due diligence prior to all new site acquisitions.  For further information, refer to Note 20 of the Notes to Consolidated Condensed Financial Statements.

Environmental Sustainability

The Company has pursued environmental sustainability in a number of ways. Processes are monitored in an attempt to produce the least amount of waste. All of the waste disposal firms used by the Company are carefully selected in an attempt to prevent any future Superfund involvements. Actions are taken in an attempt to minimize the generation of hazardous wastes and to minimize air emissions. Recycling of process water is a common practice. Best management practices are used in an effort to prevent contamination of soil and ground water on the Company’s sites.

Cameron has implemented a corporate HSE Management System that incorporates many of the principles of ISO 14001 and OHSAS 18001.  The HSE Management System contains a set of corporate standards that are required to be implemented and verified by each business unit. Cameron has also implemented a corporate third-party regulatory compliance audit program to verify facility compliance with environmental, health and safety laws and regulations.  The compliance program employs or uses independent third-party auditors to audit facilities on a regular basis specific to country, region, and local legal requirements.  Audit reports are circulated to the senior management of the Company and to the appropriate business unit.  The compliance program requires corrective and preventative actions be taken by a facility to remedy all findings of non-compliance which are tracked on the corporate HSE data base.
ITEM 1B.UNRESOLVED STAFF COMMENTS

There were no unresolved comments from the SEC staff at the time of filing of this Form 10-K.
ITEM 2.PROPERTIES

The Company manufactures, markets and sells its products and provides services throughout the world, operating facilities in numerous countries ranging in size from approximately 100 square feet to approximately 1,200,000 square feet.  In addition to its manufacturing facilities, the Company also owns and leases land, warehouses, distribution centers, service and storage facilities, sales and administrative offices. The Company leases its corporate headquarters office space and headquarters space for the staff of its segments in Houston, Texas.
The table below shows the number of significant operating manufacturing, warehouse, distribution and service facilities and sales and administrative offices by business segment and geographic area at December 31, 2014.  The location and square footage information also includes land owned and leased.

 Americas  
Asia/Pacific and
Middle East
  
Europe/Africa/
Caspian/Russia
  Total 
Subsea
        
Number of locations  53   10   29   92 
Square footage:
                
Owned  3,911,480      986,536   4,898,016 
Leased  969,444   767,303   1,293,873   3,030,620 
                
Surface
                
Number of locations  74   24   27   125 
Square footage:
                
Owned  4,060,478      1,533,145   5,593,623 
Leased  881,472   1,543,367   287,288   2,712,127 
                
Drilling
                
Number of locations  34   5   10   49 
Square footage:
                
Owned  1,809,235      446,681   2,255,916 
Leased  29,983,104   535,238   227,236   30,745,578 
                
V&M
                
Number of locations  61   20   12   93 
Square footage:
                
Owned  1,371,292   18,729   747,488   2,137,509 
Leased  1,392,037   755,896   206,562   2,354,495 
                 
Corporate ―                
Number of locations  11   2   6   19 
Square footage:
                
Owned  3,247,263         3,247,263 
Leased  225,592   38,904   73,536   338,032 
                 
Total ―                
Number of locations  233   61   84   378 
Square footage:
                
Owned  14,399,748   18,729   3,713,850   18,132,327 
Leased  33,451,649   3,640,708   2,088,495   39,180,852 

The Company’s operations in the “Americas” are mainly located in North and South America.  The Company’s operations in the “Asia/Pacific and Middle East” region are mainly located on the Asian continent, in countries considered to be on the Pacific rim of the Asian continent or in the area of the world commonly known as the “Middle East”.  The Company’s operations in “Europe/Africa/Caspian/Russia” are mainly located in the United Kingdom, Norway, on the European continent, in Angola, Algeria, Nigeria, Russia and areas surrounding the Caspian Sea.

Cameron believes its facilities are suitable for their present and intended purposes and are adequate for the Company’s current and anticipated level of operations.

ITEM 3.LEGAL PROCEEDINGS

The Company is subject to a number of contingencies, including litigation, tax contingencies and environmental matters.

Litigation

The Company has been and continues to be named as a defendant in a number of multi-defendant, multi-plaintiff tort lawsuits. At December 31, 2014, the Company’s Consolidated Balance Sheet included a liability of approximately $17 million for such cases. The Company believes, based on its review of the facts and law, that the potential exposure from these suits will not have a material adverse effect on its consolidated results of operations, financial condition or liquidity.
Tax and Other Contingencies

The Company has legal entities in over 50 countries. As a result, the Company is subject to various tax filing requirements in these countries. The Company prepares its tax filings in a manner which it believes is consistent with such filing requirements. However, some of the tax laws and regulations to which the Company is subject require interpretation and/or judgment. Although the Company believes the tax liabilities for periods ending on or before the balance sheet date have been adequately provided for in the financial statements, to the extent a taxing authority believes the Company has not prepared its tax filings in accordance with the authority’s interpretation of the tax laws and regulations, the Company could be exposed to additional taxes.

The Company has been assessed customs duties and penalties by the government of Brazil totaling almost $50 million at December 31, 2014, including interest accrued at local country rates, following a customs audit for the years 2003-2010.  The Company filed an administrative appeal and believes a majority of this assessment will ultimately be proven to be incorrect because of numerous errors in the assessment, and because the government has not provided appropriate supporting documentation for the assessment.  As a result, the Company currently expects no material adverse impact on its results of operations or cash flows as a result of the ultimate resolution of this matter.  No amounts have been accrued for this assessment as of December 31, 2014 as no loss is currently considered probable.

Environmental Matters

The Company is currently identified as a potentially responsible party (PRP) for one site designated for cleanup under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) or similar state law. The Osborne site is a landfill into which a predecessor of the Reciprocating Compression operation in Grove City, Pennsylvania deposited waste, where remediation was completed in 2011 and remaining costs relate to ongoing ground water monitoring. The Company is also a party with de minimis exposure at other CERCLA sites.

The Company is engaged in site cleanup under the Voluntary Cleanup Plan of the Texas Commission on Environmental Quality ("TCEQ") at a former manufacturing location in Houston, Texas and had been engaged in one at a former manufacturing location in Missouri City, Texas.  With respect to the Missouri City site, the Company received a Certificate of Completion from the TCEQ on February 17, 2015.  With respect to the Houston site, in 2001, the Company discovered that contaminated underground water had migrated under an adjacent residential area. Pursuant to applicable state regulations, the Company notified the affected homeowners. Concerns over the impact on property values of the underground water contamination and its public disclosure led to a number of claims by homeowners.  The Company has settled these claims, primarily as a result of the settlement of a class action lawsuit, and is obligated to reimburse approximately 190 homeowners for any diminution in value of their property due to contamination concerns at the time of the property's sale. Test results of monitoring wells on the southeastern border of the plume indicate that the plume is moving in a new direction, likely as a result of a ground water drainage system completed as part of an interstate highway improvement project.  As a result, the Company notified 39 additional homeowners, and may provide notice to additional homeowners, whose property is adjacent to the class area that their property may be affected. The Company continues to monitor the situation to determine whether additional remedial measures would be appropriate.  The Company believes, based on its review of the facts and law, that any potential exposure from existing agreements as well as any possible new claims that may be filed with respect to this underground water contamination will not have a material adverse effect on its financial position or results of operations. The Company's Consolidated Balance Sheet included a noncurrent liability of approximately $7 million for these matters as of December 31, 2014.

Additionally, the Company has discontinued operations at a number of other sites which had been active for many years and which may have yet undiscovered contamination. The Company does not believe, based upon information currently available, that there are any material environmental liabilities existing at these locations. At December 31, 2014, the Company's Consolidated Balance Sheet included a noncurrent liability of nearly $3 million for these environmental matters.

The Iran Threat Reduction and Syria Human Rights Act of 2012

The Iran Threat Reduction and Syria Human Rights Act of 2012, passed by the United States Congress and signed into law in August 2012, requires companies to report certain prohibited activities or conduct that were knowingly engaged in by the company or any of its affiliates involving Iran or other parties named therein.  For the year ended December 31, 2014, the Company had no such activities or conduct to report.
ITEM 4.MINE SAFETY DISCLOSURES

N/A.

PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The common stock of Cameron International Corporation, par value $.01 per share, is traded on the New York Stock Exchange (“NYSE”) under the symbol CAM. No dividends were paid during 2014 or 2013.

The trading activity during 2014 and 2013 was as follows:

  Price Range ($) 
  High  Low  Last 
2014      
First Quarter $64.38  $56.51  $61.77 
Second Quarter  68.54   60.63   67.71 
Third Quarter  74.89   65.88   66.38 
Fourth Quarter  66.88   44.43  ��49.95 

  Price Range ($) 
  High  Low  Last 
2013      
First Quarter $67.42  $56.40  $65.20 
Second Quarter  65.51   57.72   61.16 
Third Quarter  66.12   54.83   58.37 
Fourth Quarter  66.09   52.50   59.53 
As of February 10, 2015, the approximate number of stockholders of record of Cameron common stock was 836.

Information concerning securities authorized for issuance under stock-based compensation plans is included in Note 10 of the Notes to Consolidated Financial Statements, which notes are included in Part II, Item 8 hereof.

The Board of Directors has given management the authority to purchase nearly $3.8 billion of the Company’s common stock.  The Company, under this authorization, may purchase shares directly or indirectly by way of open market transactions or structured programs, including the use of derivatives, for the Company’s own account or through commercial banks or financial institutions.  At December 31, 2014, the Company had remaining authority for future stock purchases totaling approximately $476 million.

Shares of common stock purchased and placed in treasury during the three months ended December 31, 2014 under the Board’s authorization program described above were as follows:

 
Period
 
Total number of
shares purchased
  
Average price
paid per share
  
Total number of shares
purchased as part of
repurchase program
  
Maximum number of shares that
may yet be purchased under
repurchase program(1)
 
10/1/14-10/31/14  1,611,425  $59.39   53,617,663   9,559,708 
11/1/14-11/30/14  1,096,675  $54.98   54,714,338   9,925,578 
12/1/14-12/31/14  673,577  $48.32   55,387,915   9,538,245 
Total  3,381,677  $55.76   55,387,915   9,538,245 

(1)Based upon month-end stock price
ITEM 6.SELECTED FINANCIAL DATA

The following table sets forth selected historical financial data for the Company for each of the five years in the period ended December 31, 2014. This information should be read in conjunction with the consolidated financial statements of the Company and notes thereto included elsewhere in this Annual Report.

   Year Ended December 31, 
(dollars in millions, except per share data)
 2014  2013  2012  2011  2010 
           
Income Statement Data:
          
Revenues $10,381  $9,138  $7,795  $6,348  $5,644 
                     
Costs and expenses:                    
Cost of sales (exclusive of depreciation and amortization shown separately below)
  7,464   6,518   5,522   4,422   3,885 
Selling and administrative expenses  1,287   1,275   1,070   912   785 
Depreciation and amortization  348   298   238   191   187 
Interest, net  129   100   90   84   78 
Other costs  73   92   33   177   47 
Total costs and expenses  9,301   8,283   6,953   5,786   4,982 
                     
Income from continuing operations before income taxes  1,080   855   842   562   662 
Income tax provision  (258)  (196)  (157)  (97)  (146)
Income from continuing operations  822   659   685   465   516 
Income from discontinued operations, net of income taxes  26   65   66   57   47 
Net income  848   724   751   522   563 
                     
Less: Net income attributable to noncontrolling interests  37   25          
Net income attributable to Cameron stockholders $811  $699  $751  $522  $563 
                     
Amounts attributable to Cameron stockholders:                    
Income from continuing operations $785  $634  $685  $465  $516 
Income from discontinued operations  26   65   66   57   47 
Net income attributable to Cameron stockholders $811  $699  $751  $522  $563 
                     
Earnings per share attributable to Cameron stockholders:                    
Basic -                    
Continuing operations $3.85  $2.62  $2.78  $1.90  $2.12 
Discontinued operations  .13   .27   .27   .23   .19 
Basic earnings per share $3.98  $2.89  $3.05  $2.13  $2.31 
                     
Diluted -                    
Continuing operations $3.83  $2.60  $2.76  $1.87  $2.08 
Discontinued operations  .13   .27   .27   .23   .19 
Diluted earnings per share $3.96  $2.87  $3.03  $2.10  $2.27 
                     
Balance Sheet Data (at the end of period):
                    
Total assets $12,892  $14,249  $11,158  $9,362  $8,005 
Cameron stockholders’ equity $4,555  $5,852  $5,566  $4,707  $4,392 
Long-term debt $2,819  $2,563  $2,047  $1,574  $773 
Other long-term obligations $360  $510  $376  $400  $266 
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the historical results of operations and financial condition of Cameron International Corporation (the Company or Cameron) should be read in conjunction with the Company’s consolidated financial statements and notes thereto included elsewhere in this Annual Report. All per share amounts attributable to Cameron stockholders included in this discussion are based on diluted shares outstanding.

Overview

Cameron provides flow equipment products, systems and services to worldwide oil and gas industries through four business segments – Subsea, Surface, Drilling and Valves & Measurement (V&M).

The Subsea segment delivers integrated solutions, products, systems and services to the subsea oil and gas market, including integrated subsea production systems involving wellheads, subsea trees, manifolds and flowline connectors, subsea processing systems for the enhanced recovery of hydrocarbons, control systems, connectors and services designed to maximize reservoir recovery and extend the life of each field.  The Subsea segment includes the operations of OneSubsea™, a business jointly owned by Cameron (60%) and Schlumberger (40%).

The Surface segment provides onshore and offshore platform wellhead systems and processing solutions, including valves, chokes, actuators, Christmas trees and services to oil and gas operators.  Rental equipment and artificial lift technologies are also provided, as well as products and services involving shale gas production.

One of the major services provided by the Surface segment is CAMSHALE™ Production Solutions, which specializes in shale gas production.  In this process, intense pressure from fracing fluid (usually a mixture of water and sand) is used to crack surrounding shale.  Once the fractures are made, the water is removed from the well bore and the sand is left behind to hold the fractures open.  Oil and natural gas then moves out of the fractures, into the well bore, and up to the surface.

The Drilling segment provides drilling equipment and services to shipyards, drilling contractors, exploration & production operators and rental tool companies.  Products fall into two broad categories: pressure control equipment and rotary drilling equipment and are designed for either onshore or offshore applications.  Such products include drilling equipment packages, blowout preventers (BOPs), BOP control systems, connectors, riser systems, valve and choke manifold systems, topdrives, mud pumps, pipe handling equipment, rig designs and rig kits.

The V&M segment businesses serve portions of the upstream, midstream and downstream markets.   These businesses provide valves and measurement systems that are primarily used to control, direct and measure the flow of oil and gas as they are moved from wellheads through flow lines, gathering lines and transmission systems to refineries, petrochemical plants and industrial centers for processing. Products include gate valves, butterfly valves, Orbit® brand rising stem ball valves, double block and bleed valves, plug valves, globe valves, check valves, actuators, chokes and parts and services as well as measurement equipment products such as totalizers, turbine meters, flow computers, chart recorders, ultrasonic flow meters and sampling systems.

Exposure to offshore markets

The Company’s broad portfolio of products results in Cameron having a significant presence in the offshore oil and gas drilling, production and infrastructure market.  Cameron provides drilling equipment packages for drilling rigs, drilling and production risers, subsea production systems, oil and gas separation equipment, chokes, valves and other equipment to the offshore market.  Approximately 62% of the Company’s 2014 revenue was derived from the offshore market (51% in 2013).
Exposure to international markets

Revenues for the years ended December 31, 2014, 2013 and 2012 were generated from shipments to the following regions of the world (dollars in millions):

Region 2014  2013  2012 
       
North America $3,739  $3,557  $3,514 
South America  783   772   557 
Asia, including Middle East  2,334   2,134   1,681 
Africa  1,541   966   890 
Europe  1,816   1,415   807 
Other  168   294   346 
Total revenues $10,381  $9,138  $7,795 
Financial Summary

The following table sets forth the consolidated percentage relationship to revenues of certain income statement items for the periods presented:
    Year Ended December 31, 
     2014  2013  2012 
       
Revenues  100%  100%  100%
             
Costs and expenses:            
Cost of sales (exclusive of depreciation and amortization shown separately below)
  71.9   71.3   70.8 
Selling and administrative expenses  12.4   13.9   13.7 
Depreciation and amortization  3.4   3.3   3.1 
Interest, net  1.2   1.1   1.2 
Other costs (see Note 4)
  0.7   1.0   0.4 
Total costs and expenses  89.6   90.6   89.2 
             
Income from continuing operations before income taxes  10.4   9.4   10.8 
Income tax provision  (2.5)  (2.2)  (2.0)
             
Income from continuing operations  7.9   7.2   8.8 
Income from discontinued operations, net of income taxes  0.3   0.7   0.8 
Net income  8.2   7.9   9.6 
             
Less: Net income attributable to noncontrolling interests  0.4   0.3   - 
Net income attributable to Cameron stockholders  7.8%  7.6%  9.6%
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

Market Conditions

Information related to a measure of drilling activity and certain commodity spot and futures prices during each year and the number of available deepwater floaters at the end of each period follows:

  
Year Ended
December 31,
  Increase (Decrease) 
  2014  2013  Amount  % 
Drilling activity (average number of working rigs during period)1:
        
United States  1,861   1,761   100   5.7%
Canada  380   355   25   7.0%
Rest of world  1,337   1,296   41   3.2%
                 
Global average rig count  3,578   3,412   166   4.9%
Commodity prices (average of daily U.S. dollar prices per unit during period)2:
                
West Texas Intermediate (WTI) Cushing, OK crude spot price (per barrel)
 $93.03  $98.01  $(4.98)  (5.1)%
Brent crude spot price (per barrel)
 $99.01  $105.76  $(6.75)  (6.4)%
Henry Hub natural gas spot price (per MMBtu)
 $4.35  $3.73  $0.62   16.6%
                 
Twelve-month futures strip price (U.S. dollar amount at period end)2:
                
West Texas Intermediate Cushing, OK crude oil contract (per barrel)
 $56.57  $95.79  $(39.22)  (40.9)%
Brent crude oil contract (per barrel)
 $57.33  $110.80  $(53.47)  (48.3)%
Henry Hub natural gas contract (per MMBtu)
 $3.06  $4.19  $(1.13)  (27.0)%
                 
Contracted drillships and semi submersibles by location3:
                
U.S. Gulf of Mexico  53   46   7   15.2%
Central and South America  63   73   (10)  (13.7)%
Northwestern Europe  44   47   (3)  (6.4)%
West Africa  41   39   2   5.1%
Southeast Asia and Australia  28   27   1   3.7%
Other  49   48   1   2.1%
Total  278   280   (2)  (0.7)%

1Based on average monthly rig count data from Baker Hughes
2Source: Bloomberg
3Source:  IHS – Petrodata
Drilling activity was generally strong for the first nine months of 2014 and then began to weaken toward the end of the year as commodity prices dropped sharply in the fourth quarter and continued their rapid decline during early 2015.  We believe these declines in commodity prices will significantly reduce drilling activity levels in 2015, which will lower the demand for our products and services.  Although the Company has a substantial backlog of work that is scheduled to be executed during 2015, weaker demand for our products and services is expected to have an adverse impact on new orders, revenues and earnings.  Based on the Company’s long history in the energy sector, we believe such declines in commodity prices and demand are cyclical in nature.  During such cyclical downturns, we take steps to adjust our commercial, manufacturing and support operations as appropriate to ensure that the Company remains competitive and financially sound.  The Company cannot predict the duration or depth of this down-cycle.
The increase in drilling rig activity during 2014 as compared to 2013 was primarily due to an increase in North American rigs drilling for oil and higher activity levels in most major regions of the world, except Latin America.  Despite the improvement in natural gas pricing for much of 2014, overall average drilling activity levels reflected only a modest improvement.  The average number of rigs drilling for gas was down in North America during 2014 as compared to 2013.  Rigs drilling for gas were approximately 18% of the total North American rig count in December 2014 compared to 21% in December 2013.  While December 2014 rig count levels were near the averages for the full year, there was a 7% drop in the average global rig count level in January 2015, mainly as the result of a nearly 11% drop in the average U.S. rig count, reflecting the impact of the decline in commodity prices during the latter half of 2014.

Crude oil prices trended downward during the second half of 2014.  For example, after reaching a high of $107.62 in late July, WTI crude prices closed the year at $53.27 per barrel, a decline of over 50%.  The twelve month futures price for crude oil at December 31, 2014 was approximately 6% higher than spot prices at the end of the year.  Prices for Brent crude followed a similar trend, ending the year with a $57.33 futures strip price, or 8% lower than the closing spot price.  The year-end Brent crude spot price was down 44% from mid-year levels.

Natural gas prices were fairly consistent for much of 2014, averaging $4.35 per MMBtu at Henry Hub, which is a 17% increase as compared to 2013, although prices began to decline near the end of 2014.  The 12-month futures strip price for natural gas at December 31, 2014 was $3.06 per MMBtu at Henry Hub, which is comparable to the spot price of $2.99 at December 31, 2014.

The total number of drillships and semi-submersibles available for contract and under contract at December 31, 2014 were generally consistent with the prior year with some redeployment occurring away from Central and South America to the U.S. Gulf of Mexico and certain other regions of the world.  At December 31, 2014, the supply of available semisubmersibles and drillships currently exceeds demand with additional supply expected to come on-line during 2015.  In connection with this and in response to current market conditions, certain drilling contractors have previously announced plans to cold stack or scrap certain older rigs in their existing portfolio during 2015.

Results of Operations

Consolidated Results – 2014 Compared to 2013

Net income attributable to Cameron stockholders for 2014 totaled $811 million, compared to $699 million for 2013.  These amounts included $26 million and $65 million, respectively, of income from discontinued operations for 2014 and 2013.  Discontinued operations include the Company’s Reciprocating Compression business sold in June 2014 and the Centrifugal Compression business for which the Company entered into a definitive agreement to sell in August 2014 (see Note 2 of the Notes to Consolidated Condensed Financial Statements for further information).  The closing of the sale of Centrifugal Compression was effective January 1, 2015.  Consolidated net income also includes $37 million and $25 million, respectively, of income attributable to noncontrolling interests for 2014 and 2013.

Earnings from continuing operations per diluted share attributable to Cameron stockholders totaled $3.83 in 2014, compared to $2.60 in 2013.  Included in the 2014 and 2013 results were other costs, totaling $0.31 and $0.29 per diluted share, respectively, as described further below.

Absent these costs, diluted earnings from continuing operations per share attributable to Cameron stockholders would have been $4.14 in 2014 and $2.89 in 2013, an increase of approximately 43%.

Total revenues for the Company increased $1.2 billion, or 13.6%, during 2014 as compared 2013.  The vast majority of the increase was attributable to higher revenues in the Drilling and Surface segments reflecting the impact of higher beginning-of-the-year backlog and continued strength throughout a good portion of 2014 in North American activity levels.  Revenues in the Subsea business were also up 9%, whereas V&M segment revenues were essentially flat with 2013.

As a percent of revenues, cost of sales (exclusive of depreciation and amortization) increased from 71.3% during 2013 to 71.9% for 2014, mainly as a result of lower product margins in the Surface and V&M segments largely relating to pricing pressures and higher costs. Comments regarding margins in the Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to Revenues minus Cost of Sales (exclusive of depreciation and amortization) as shown separately on the Company’s Consolidated Results of Operations Statement for each of the three years in the period ended December 31, 2014.

Selling and administrative expenses increased $12 million, or 1%, during 2014 as compared to 2013.  Selling and administrative expenses were 12.4% of revenues for 2014, down from 13.9% for 2013, reflecting the impact of cost control efforts throughout the Company.
Depreciation and amortization expense totaled $348 million for 2014 as compared to $298 million during 2013, an increase of $50 million.  The increase was due primarily to higher depreciation expense as a result of recent increased levels of capital spending, mainly in the Subsea and Surface segments.

Net interest increased $29 million, from $100 million during 2013 to $129 million during 2014, mainly as a result of additional interest associated with (i) $750 million of new senior notes issued by the Company in December 2013, and (ii) $500 million of new senior notes issued in June 2014.

During 2014, the Company incurred $73 million of other costs, net of credits, as compared to $92 million in 2013.  These other costs (credits) consisted of:

     Year Ended December 31, 
(dollars in millions)
 2014  2013 
     
Goodwill impairment $40  $ 
Litigation costs  11   3 
Loss on disposal of non-core assets  10    
Impairment of identifiable intangible assets  4    
Cost for early retirement of debt  3    
OneSubsea formation and other acquisition and integration costs  2   60 
International pension curtailment gains, net  (8)   
Gain from remeasurement of prior interest in equity method investment  (8)   
Mark-to-market impact on currency derivatives not designated as accounting  hedges  8   1 
Currency devaluation     10 
Severance, restructuring and other costs  11   18 
         
Total other costs $73  $92 

The Company’s effective tax rate for 2014 was 23.9% compared to 22.9% during 2013.  The components of the effective tax rates for both years were as follows:

     Year Ended December 31, 
     2014  2013 
(dollars in millions)
 Tax Provision  Tax Rate  Tax Provision  Tax Rate 
         
Provision based on statutory rates in jurisdictions where income is earned $254   23.5% $193   22.5%
Adjustments to income tax provision:
                
Recognition of certain historical tax benefits as prior uncertainty regarding those benefits has been resolved  (5)  (0.5)  (16)  (1.9)
Tax effect of goodwill impairment  9   0.9       
Finalization of prior year returns  17   1.6   29   3.4 
Tax effects of changes in legislation  2   0.2   (10)  (1.1)
Accrual adjustments and other  (19)  (1.8)      
                 
Tax provision $258   23.9% $196   22.9%

Segment Results – 2014 Compared to 2013

Segment revenues and operating income before interest and income taxes represent the results of activities involving third-party customers and transactions with other segments.  Segment operating income before interest and income taxes represents the profit remaining in the segment after deducting third-party and intersegment cost of sales, selling and administrative expenses and depreciation and amortization expense from third-party and intersegment revenues.  For further information on the Company’s segments, see Note 16 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Subsea Segment

     
Year Ended
December 31,
  Increase (Decrease) 
(dollars in millions)
 2014  2013  $  % 
           
Revenues $3,067  $2,813  $254   9.0%
Segment operating income before interest and income taxes $207  $152  $55   36.2%
Segment operating income before interest and income taxes as a percent of revenues  6.7%  5.4%  N/A  1.3 pts.
                 
Orders $2,356  $4,405  $(2,049)  (46.5)%
Backlog (at period-end)
 $4,263  $4,958  $(695)  (14.0)%

Revenues
Revenues increased in 2014 as compared to 2013 primarily as a result of higher international project activity levels on large subsea projects offshore Brazil and Nigeria, partially offset by certain subsea projects nearing completion in the Gulf of Mexico and the Asia-Pacific region, as well as a moderate decline in custom processing equipment revenues.

Segment operating income before interest and income taxes as a percent of revenues
Segment operating income before interest and income taxes as a percent of revenues improved in 2014 as compared to 2013, due mainly to better margin performance on large subsea projects and cost control efforts that limited increases in selling and administrative expenses.  Partially offsetting this improvement was increased depreciation and amortization expense, largely associated with higher amortization of purchased intangibles and additional capital spending in recent periods.
Orders
Orders declined significantly in 2014 as compared to 2013, a year in which there were four large project awards received covering more than 90 new subsea trees and two large project awards for custom processing equipment.  No similar-sized large subsea or custom processing equipment orders were received in 2014.

Backlog (at period-end)
A decline in new project awards during 2014, along with increased revenues, were the main drivers for the reduction in backlog levels at December 31, 2014 as compared to December 31, 2013.

Surface Segment

      
Year Ended
December 31,
  Increase 
(dollars in millions)
 2014  2013  $  % 
           
Revenues $2,411  $2,077  $334   16.1%
Segment operating income before interest and income taxes $427  $367  $60   16.3%
Segment operating income before interest and income taxes as a percent of revenues  17.7%  17.7%  N/A  0.0 pts.
                 
Orders $2,480  $2,372  $108   4.6%
Backlog (at period-end)
 $1,025  $963  $62   6.4%
Revenues
Revenues increased in 2014 as compared to 2013 due mainly to higher activity levels, as well as increased market penetration, in various North American unconventional resource regions and higher deliveries to customers in the North Sea, Saudi Arabia and Oman, as well as higher sales to the Company’s Drilling segment.

Segment operating income before interest and income taxes as a percent of revenues
Segment operating income before interest and income taxes as a percent of revenues was flat in 2014 as compared to 2013 as overall cost increases mostly mirrored the increase in revenues during 2014.
Orders
Orders were up modestly in 2014 as compared to 2013 as increased activity levels, along with higher market penetration in various North American unconventional resource regions, more than compensated for a decline in 2014 demand from customers operating in Iraq, in comparison to the strong order levels received for that region in 2013.

Backlog (at period-end)
The increase in segment backlog at December 31, 2014 as compared to December 31, 2013 was entirely due to new equipment order rates exceeding deliveries during the year.

Drilling Segment
    
Year Ended
December 31,
  Increase (Decrease) 
(dollars in millions)
 2014  2013  $  % 
           
Revenues $3,049  $2,327  $722   31.0%
Segment operating income before interest and income taxes $474  $311  $163   52.4%
Segment operating income before interest and income taxes as a percent of revenues  15.5%  13.4%  N/A  2.1 pts.
                 
Orders $2,449  $2,803  $(354)  (12.6)%
Backlog (at period-end)
 $3,327  $4,141  $(814)  (19.7)%
Revenues
Revenues increased in 2014 as compared to 2013 driven by execution of orders from the segment’s substantial beginning-of-the-year backlog levels and better project execution, as well as an increased demand for the Company’s services.

Segment operating income before interest and income taxes as a percent of revenues
The increase in segment operating income before interest and income taxes as a percent of revenues in 2014 as compared to 2013 was due primarily to cost control efforts which limited the amount of increase in selling and administrative expenses as compared to 2013.

Orders
Order rates declined in 2014 as compared to 2013 as a result of a slowdown in large rig construction and drilling stack project awards in 2014, partially offset by a modest improvement in orders for services.

Backlog (at period-end)
Backlog at December 31, 2014 decreased from December 31, 2013 mainly due to the slowdown in large rig construction and drilling stack project awards in 2014, as described above.
V&M Segment
  
Year Ended
December 31,
  Increase (Decrease) 
(dollars in millions)
 2014  2013  $  % 
           
Revenues $2,125  $2,105  $20   1.0%
Segment operating income before interest and income taxes $393  $414  $(21)  (5.1)%
Segment operating income before interest and income taxes as a percent of revenues  18.5%  19.7%  N/A  (1.2) pts.
                 
Orders $2,091  $2,086  $5   0.2%
Backlog (at period-end)
 $921  $1,017  $(96)  (9.4)%
Revenues
Overall, segment revenues for 2014 were relatively flat when compared to 2013 as increased sales of distributed valves and measurement products, mainly resulting from continued strength in the North American market for much of the year, were mostly offset by lower engineered and process valves sales due largely to project slippage, recent order weakness and delayed timing of valve deliveries due to various customer changes.

Segment operating income before interest and income taxes as a percent of revenues
The ratio of segment operating income before interest and income taxes as a percent of revenues declined in 2014 as compared to 2013 due primarily to lower engineered and process valve product margins, resulting mainly from pricing pressures and the impact of higher manufacturing costs, partially offset by lower selling and administrative costs.

Orders
Orders were essentially flat in 2014 as compared to 2013.  Higher North American activity levels for much of 2014 resulted in full year order increases for distributed valves and measurement products. Sequentially, however, order rates declined in both product lines in the fourth quarter of 2014 as compared to the third quarter of 2014 as a result of weakening commodity prices and activity levels during the latter half of 2014.

The full year product line increases described above were largely offset by a decline in demand for both engineered and process valves resulting mainly from project slippage and customer spending constraints associated with large international production expansion projects.

Backlog (at period-end)
Backlog levels for the V&M segment at December 31, 2014 decreased from December 31, 2013, as recent order rates for new engineered and process valves have not kept pace with recent deliveries. These decreases were partially offset by strong demand for distributed valves during much of 2014.
Corporate Expenses

Corporate expenses were $145 million for 2014, a decline of $17 million from $162 million in 2013.  The decrease was due primarily to lower spending associated with the Company’s information technology systems and lower costs associated with various legal matters.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Market Conditions

Information related to a measure of drilling activity and certain commodity spot and futures prices during each year and the number of available deepwater floaters at the end of each period follows:

  
Year Ended
December 31,
  Increase (Decrease) 
  2013  2012  Amount  % 
Drilling activity (average number of working rigs during period)1:
        
United States  1,761   1,919   (158)  (8.2)%
Canada  355   365   (10)  (2.7)%
Rest of world  1,296   1,234   62   5.0%
                 
Global average rig count  3,412   3,518   (106)  (3.0)%
Commodity prices (average of daily U.S. dollar prices per unit during period)2:
                
West Texas Intermediate Cushing, OK crude spot price (per barrel)
 $98.01  $94.10  $3.91   4.2%
Brent crude spot price (per barrel)
 $105.76  $109.06  $(3.30)  (3.0)%
Henry Hub natural gas spot price (per MMBtu)
 $3.73  $2.75  $0.98   35.6%
                 
Twelve-month futures strip price (U.S. dollar amount at period end)2:
                
West Texas Intermediate Cushing, OK crude oil contract (per barrel)
 $95.79  $93.19  $2.60   2.8%
Brent crude oil contract (per barrel)
 $110.80  $111.11  $(0.31)  (0.3)%
Henry Hub natural gas contract (per MMBtu)
 $4.19  $3.60  $0.59   16.4%
                 
Contracted drillships and semi submersibles by location: 3
                
U.S. Gulf of Mexico  46   40   6   15.0%
Central and South America  73   84   (11)  (13.1)%
Northwestern Europe  47   45   2   4.4%
West Africa  39   32   7   21.9%
Southeast Asia and Australia  27   21   6   28.6%
Other  48   47   1   2.1%
                 
Total  280   269   11   4.1%

1Based on average monthly rig count data from Baker Hughes
2Source: Bloomberg
3Source:  IHS – Petrodata

The average number of worldwide operating rigs during 2013 declined 3% from 2012 due primarily to a lower average number of gas rigs working in North America.  During 2013, rig count levels dropped to their lowest point in May before recovering 9% by December.  Average worldwide rig count levels for the month of December 2013 were up 3% from the average number of rigs operating during the month of December 2012 but were down 11% from February 2012, the highest monthly average level of operating rigs counted during the last ten year period.

The decline during 2013 in the average annual United States rig count was the result of a 31% decline in the average number of working gas rigs.  Oil rigs accounted for 78% of the average 2013 U.S. rig count compared to 71% for 2012.  The U.S. rig count level during the month of December 2013 increased from earlier months in the year and was just under the average U.S. rig count level for the month of December 2012.
A decline in the average number of operating oil rigs accounted for the drop in the average Canadian rig count from 2012 to 2013. Oil rigs accounted for nearly 66% of the average 2013 Canadian rig count compared to almost 72% for 2012.
For the rest of the world, increased drilling activity in Africa contributed to almost half of the 5% increase in average operating rigs in 2013 as compared to 2012.

WTI crude oil prices during 2013 went from a low of under $87 per barrel in April to a high of over $110 per barrel in September before declining during the remainder of the year to close at $98.42 per barrel at December 31, 2013, in line with the average daily price for the year and up 7% from the closing price at December 31, 2012.   The 12-month futures strip price for WTI crude oil was $95.79 at December 31, 2013, down 3% from 2013’s year-end closing spot price.  In comparison, Brent crude oil spot prices averaged almost $106 per barrel for 2013, compared to $109 per barrel in 2012.

Natural gas spot prices trended upward throughout much of 2013 from a low of $3.08 per MMBtu at Henry Hub in January to a high of $4.52 per MMBtu at Henry Hub during December.  The December 31, 2013 closing price was 26% higher than the closing price at December 31, 2012.  However, the 12-month futures strip price for natural gas at Henry Hub at December 31, 2013 was $4.19, down 3% from 2013’s year-end closing price, but up 12% from the average 2013 price level.

The decline during 2012 in the price of natural gas negatively affected gas drilling activity levels in North America and order rates that year for certain of the Company’s products used in natural gas drilling and production, in particular distributed valves, which serve this market.  Although natural gas prices recovered somewhat during 2013 from 2012 levels, North American gas rig count levels did not show a similar recovery during that same period.

Results of Operations

Consolidated Results – 2013 Compared to 2012

Net income attributable to Cameron stockholders for 2013 was $699 million compared to $751 million for 2012.  These amounts included $65 million and $66 million, respectively, of income from discontinued operations for 2013 and 2012.  Consolidated net income for 2013 also includes $25 million of income attributable to noncontrolling interests (none for 2012).

Earnings from continuing operations per diluted share attributable to Cameron stockholders for 2013 were $2.60 down from $2.76 per share in 2012.  The Company incurred approximately $0.29 per share of other costs in 2013, as described further below.  Such other costs in 2012 amounted to approximately $0.11 per share.  Absent these costs, the Company’s diluted earnings per share from continuing operations would have been $2.89 in 2013 compared to $2.87 in 2012, an increase of approximately 1%.

Total revenues for the Company increased by $1.3 billion, or 17.2%, from $7.8 billion in 2012 to $9.1 billion for 2013, with the improvement noted mainly in the Subsea and Drilling segments. Businesses acquired since the beginning of 2012 accounted for approximately 34% of the increase.  Absent the effect of these newly acquired businesses, revenues climbed 11% in 2013 as compared to 2012.  A further discussion of revenues by segment may be found below.

As a percent of revenues, cost of sales (exclusive of depreciation and amortization) increased from 70.8% in 2012 to 71.3% for 2013.  The increase was due largely to execution issues in the Drilling segment.

Selling and administrative expenses increased $205 million, or 19.2%, during 2013 as compared to 2012.

As a percent of revenues, selling and administrative expenses increased from 13.7% in 2012 to 13.9% in 2013.
Higher employee and facility-related costs as a result of increased headcount, business volumes and international and services expansion efforts, particularly in the Surface and Drilling segments, accounted for most of the dollar increase.

Depreciation and amortization increased $60 million, or 25.2%, during 2013 as compared to 2012 mainly due to:

increased capital spending in recent periods primarily for (i) expansion of the fleet of rental equipment available in the Surface segment, (ii) enhancing the manufacturing capacity in the Drilling segment, and (iii) development of the Company’s enhanced business information systems as well as,
the impact of newly acquired businesses, which accounted for nearly 46% of the increase in costs during 2013.

Net interest for 2013 totaled $100 million, an increase of $10 million from 2012.  The increase was due mainly to (i) the full year impact of interest during 2013 on the $500 million principal amount of debt issued in May 2012 and (ii) the $750 million principal amount of debt issued in December 2013, as well as additional interest associated with prior years’ income tax liabilities.
During 2013, the Company incurred $92 million of other costs as compared to $33 million in 2012.  These other costs consisted of:

   Year Ended December 31, 
(dollars in millions)
 2013  2012 
     
OneSubsea formation and other acquisition and integration costs $60  $16 
Currency devaluation  10    
Impairment of identifiable intangible assets     18 
International pension settlement costs     7 
Litigation costs  3   2 
Mark-to-market impact on currency derivatives not designated as accounting hedges  1   (16)
Severance, restructuring and other costs  18   6 
         
Total other costs $92  $33 

The Company’s effective tax rate for 2013 was 22.9% compared to 18.6% during 2012.  The components of the effective tax rates for both years were as follows:

    Year Ended December 31, 
     2013  2012 
(dollars in millions)
 Tax Provision  Tax Rate  Tax Provision  Tax Rate 
         
Provision based on statutory rates in jurisdictions where income is earned $193   22.5% $206   24.4%
Adjustments to income tax provision:
                
Recognition of certain historical tax benefits as prior uncertainty regarding those benefits has been resolved  (16)  (1.9)  (22)  (2.6)
Finalization of prior year returns  29   3.4   (21)  (2.5)
Tax effects of changes in legislation  (10)  (1.1)  (2)  (0.2)
Accrual adjustments and other        (4)  (0.5)
                 
Tax provision $196   22.9% $157   18.6%
Segment Results – 2013 Compared to 2012

Subsea Segment
     
Year Ended
December 31,
  Increase 
(dollars in millions)
 2013  2012  $  % 
           
Revenues $2,813  $2,061  $752   36.5%
Segment operating income before interest and income taxes $152  $72  $80   111.1%
Segment operating income before interest and income taxes as a percent of revenues  5.4%  3.5%  N/A  1.9 pts.
                 
Orders $4,405  $2,427  $1,978   81.5%
Backlog (at period-end)
 $4,958  $2,730  $2,228   81.6%
Revenues
Revenues increased in 2013 as compared to 2012 mainly due to (i) the impact of businesses contributed by Schlumberger upon the formation of OneSubsea, effective June 30, 2013, (ii) higher subsea project activity levels, mainly for fields offshore Brazil and Australia, and (iii) higher international project activity levels associated with processing solutions.
Segment operating income before interest and income taxes as a percent of revenues
Segment operating income before interest and income taxes as a percent of revenues increased in 2013 as compared to 2012 mainly as a result of improved margins on large subsea projects, as well as stronger volumes and better absorption of costs in the process systems product line.

Orders
Orders increased significantly in 2013 as compared to 2012 largely due to (i) an 87% increase in the number of new subsea trees awarded in 2013, mainly for projects offshore Brazil and in the UK North Sea, (ii) an award of nearly $250 million for a gas processing facility in Malaysia, and (iii) the impact of businesses contributed by Schlumberger upon the formation of OneSubsea in June 2013, which accounted for almost 19% of the increase.

Backlog (at period-end)
Similar to orders, backlog at December 31, 2013 was significantly higher than at December 31, 2012.  Nearly 25% of the increase in backlog from December 31, 2012 was due to the impact of businesses contributed by Schlumberger as part of the formation of OneSubsea in June 2013.  The remaining increase largely reflected the high level of new major project awards received in 2013, as described above.

Surface Segment
     
Year Ended
December 31,
  Increase 
(dollars in millions)
 2013  2012  $  % 
           
Revenues $2,077  $1,859  $218   11.7%
Segment operating income before interest and income taxes $367  $315  $52   16.5%
Segment operating income before interest and income taxes as a percent of revenues  17.7%  16.9%  N/A  0.8 pts.
                 
Orders $2,372  $2,075  $297   14.3%
Backlog (at period-end)
 $963  $667  $296   44.4%

Revenues
Revenues increased in 2013 as compared to 2012 due primarily to (i) higher activity levels and increased deployment of rental equipment in unconventional resource regions of North America and (ii) higher shipments for projects in the U.K. North Sea, the Caspian Sea, the Middle East and in the Asia-Pacific region.  Partially offsetting this improvement was a significant decline in revenues for wellhead processing equipment and services, primarily in North America.

Segment operating income before interest and income taxes as a percent of revenues
Segment operating income before interest and income taxes as a percent of revenues increased in 2013 as compared to 2012.  Improved product margins, resulting mainly from better price realization and product mix on various international projects, was partially offset by (i) higher depreciation and amortization expense from purchased intangibles and recent capital spending for the expansion of the fleet of rental equipment available and (ii) increased selling and administrative expenses largely associated with higher employee-related costs.

Orders
Orders increased during 2013 as compared to 2012 mainly as a result of (i) high demand for new equipment in Saudi Arabia and Iraq, (ii) higher activity levels, increased market penetration and rental equipment deployments in North America, and (iii) increased demand for equipment in the U.K. North Sea and the Caspian Sea.  Partially offsetting these gains was a significant decline in demand for wellhead processing equipment and services, primarily in North America.

Backlog (at period-end)
Increased levels of demand during 2013 resulted in the increase in backlog from December 31, 2012 to December 31, 2013.
Drilling Segment
      
Year Ended
December 31,
  Increase (Decrease) 
(dollars in millions)
 2013  2012  $  % 
           
Revenues $2,327  $1,807  $520   28.8%
Segment operating income before interest and income taxes $311  $329  $(18)  (5.5)%
Segment operating income before interest and income taxes as a percent of revenues  13.4%  18.2%  N/A  (4.8) pts.
                 
Orders $2,803  $3,578  $(775)  (21.7)%
Backlog (at period-end)
 $4,141  $3,671  $470   12.8%

Revenues
Revenues increased in 2013 as compared to 2012 driven by (i) the execution of orders from the segment’s substantial beginning-of-the-year backlog levels, (ii) the impact of businesses acquired since the beginning of 2012 and (iii) recovery in execution delays from prior periods.

Segment operating income before interest and income taxes as a percent of revenues
Segment operating income before interest and income taxes as a percent of revenues decline in 2013 as compared to 2012 mainly due to a decrease in margins largely related to project execution issues and the impact of businesses acquired since the beginning of 2012, which carried higher costs than certain other preexisting businesses in this segment.

Orders
Orders declined in 2013 as compared to 2012, a year which included a large project award for a complete drilling equipment package for a new ultra-deepwater drillship and various large awards for drilling stacks for new drillship construction and as spares for existing rigs.  This same level of awards received in 2012 did not repeat in 2013.  Partially offsetting this decline was the impact of orders added from new businesses acquired since the beginning of 2012 and an increase in activity levels associated with the Company’s services.

Backlog (at period-end)
Backlog increased at December 31, 2013 as compared to December 31, 2012, mainly as a result of orders for new equipment and services exceeding revenues during the year.

V&M Segment
     
Year Ended
December 31,
  Increase (Decrease) 
(dollars in millions)
 2013  2012  $  % 
           
Revenues $2,105  $2,168  $(63)  (2.9)%
Segment operating income before interest and income taxes $414  $396  $18   4.5%
Segment operating income before interest and income taxes as a percent of revenues  19.7%  18.3%  N/A  1.4 pts.
                 
Orders $2,086  $2,104  $(18)  (0.9)%
Backlog (at period-end)
 $1,017  $1,051  $(34)  (3.2)%

Revenues

Revenues decreased in 2013 as compared to 2012 as a result of lower deliveries of engineered valves for major international pipeline projects, along with the impact of lower order rates during the year due to market weakness.

Segment operating income before interest and income taxes as a percent of revenues

Segment operating income before interest and income taxes as a percent of revenues increased in 2013 as compared to 2012 due primarily to improved product margins in all product lines, mainly resulting from better pricing, which was partially offset by higher employee-related expenses, higher consulting expenditures and increased costs resulting from expansion of V&M’s international sales efforts.
Orders

Orders in 2013 declined modestly from 2012 as a result of decreased demand for engineered and process valves due to pipeline project delays and lower major infrastructure project awards.  This was mostly offset by higher demand for distributed valves resulting from higher North American activity levels and changes in stocking requirements by distributors.

Backlog (at period-end)

Backlog levels at December 31, 2013 decreased from December 31, 2012 in all product lines, except for measurement products, as order rates, mainly for new engineered and process valves, did not keep up with deliveries during 2013.

Corporate Expenses

Corporate expenses totaled $162 million in 2013 as compared to $126 million in 2012, an increase of $36 million.  The increase mainly reflects (i) increased spending in connection with the implementation of the Company’s new enterprise-wide information technology system, (ii) higher costs for various legal matters, and (ii)  higher employee-related costs due to increased headcount and incentive compensation.

Liquidity and Capital Resources

Consolidated statements of cash flows

Net cash provided by operating activities for 2014 totaled $1.2 billion, an increase of $355 million, from the $838 million of cash provided by operating activities during 2013.  The 2014 amount was partially offset by approximately $100 million of tax payments made during the year associated with the pre-tax gain recognized on the sale of the Reciprocating Compression business.

Cash used to increase working capital in 2014 was $5 million compared to $281 million used for working capital needs in 2013.

Cash provided by investing activities was $96 million in 2014 compared to $482 million of cash provided by investing activities in 2013.  During 2014, the Company received net proceeds of $547 million from the sale of the Reciprocating Compression business.  In 2013, $523 million of net proceeds, including cash acquired, was received from the formation of the OneSubsea venture with Schlumberger.  Capital expenditures in 2014 totaled $385 million, down from $520 million in 2013.  Over 50% of the Company’s 2014 capital expenditures were in the Subsea and Surface segments, primarily to enhance the Company’s manufacturing, rental fleet and service capabilities.  During 2013, the Company also had a net $477 million drawdown from the Company’s portfolio of short-term investments into cash and cash equivalents as compared to a net use of cash of $72 million during 2014 to build up this portfolio.

Cash used for financing activities was nearly $1.6 billion in 2014 as compared to $667 million in 2013.   During 2014, the Company acquired nearly 28 million shares of treasury stock at cash cost of $1.7 billion, an increase of $216 million from $1.5 billion spent in 2013 to acquire nearly 27 million shares.  Also, during 2014, the Board of Directors authorized the Company to initiate a commercial paper program with authority to issue up to $500 million in short-term debt.  Under this program, the Company issued commercial paper totaling $201 million in principal amount for general corporate needs.  The average term of the outstanding commercial paper as of December 31, 2014 was approximately 36 days.  The Company currently anticipates being able to continue to issue new commercial paper to fund or extend outstanding commercial paper as it comes due for payment.  In June 2014, the Company repaid $250 million of floating rate notes upon maturity and issued a total of $500 million of new senior notes split equally between 3- and 10-year maturities.  Additionally, the Company, in July 2014, spent $253 million, which included a make-whole premium plus accrued interest, to redeem early $250 million principal amount of 1.6% Senior Notes.  During 2013, the Company issued $750 million principal amount of senior unsecured notes as described more fully in Note 11 of the Notes to Consolidated Financial Statements and borrowed an additional $46 million, mainly through its international subsidiaries.  The Company also received $62 million of contributions from its noncontrolling interest partners during 2013.
Future liquidity requirements

At December 31, 2014, the Company had nearly $1.6 billion of cash, cash equivalents and short-term investments.  Approximately $702 million of the Company’s cash, cash equivalents and short-term investments at December 31, 2014 were in the OneSubsea venture.  Dividends of available cash from OneSubsea to the venture partners, 40% of which would go to Schlumberger, require approval of the OneSubsea Board of Directors prior to payment.  Of the remaining cash, cash equivalents and short-term investments not held by OneSubsea, $217 million was located in the United States.

Total debt at December 31, 2014 was nearly $3.1 billion, most of which was in the United States.  Excluding capital leases, approximately $768 million of the debt obligations, excluding interest, have maturities within the next three-year period.  The remainder of the Company’s long-term debt is due in varying amounts between 2018 and 2043.

Excluding discontinued operations, the Company’s backlog decreased approximately 14% from December 31, 2013, reflecting a weakening in recent order rates and as a result of the cancellation of a large drilling project award in the first quarter of 2014 totaling nearly $243 million.  Orders during 2014 were down nearly 20% from the same period in 2013 due mainly to certain large subsea project awards received in 2013 that did not repeat at those levels during 2014.  The timing of such large project awards are variable period-over-period.  The Company views its backlog of unfilled orders, current order rates, current rig count levels and current and future expected oil and gas prices to be, in varying degrees, leading indicators of and factors in determining its estimates of future revenues, cash flows and profitability levels.  Information regarding actual 2014 and 2013 average rig count and commodity price levels and forward-looking twelve-month market-traded futures prices for crude oil and natural gas are shown in more detail under the captions “Market Conditions” above.  A more detailed discussion of orders and December 31 backlog levels by segment may be found under “Segment Results” for each period above.

The Company expects the recent drop in commodity prices and the weakening in activity levels to have a negative impact on its orders and revenues in 2015.  However, based on its current financial condition and existing backlog levels, the Company believes that it will be able to meet its short- and longer-term liquidity needs with existing cash, cash equivalents and short-term investments on hand, expected cash flow from future operating activities and amounts available for borrowing under its $835 million five-year multi-currency Revolving Credit Facility, which matures on June 6, 2016, and its three-year $750 million Revolving Credit Facility, described further in Note 11 of the Notes to Consolidated Condensed Financial Statements.  Up to $200 million of this new facility may be used for letters of credit.  At December 31, 2014, no amounts had been borrowed under the $835 million facility.  The Company had issued letters of credit totaling $69 million under the new $750 million Revolving Credit Facility, leaving $681 million available for future use.  The Company also believes, based on its existing current credit standing, that it will be able to continue to refinance existing debt upon maturity, if desired.

The Company has an authorized stock repurchase program whereby the Company may purchase shares directly or indirectly by way of open market transactions or structured programs, including the use of derivatives, for the Company’s own account or through commercial banks or financial institutions.  The program, initiated in October 2011, has had a series of authorizations by the Board of Directors totaling approximately $3.8 billion since inception.  At December 31, 2014, the Company had remaining authority for future stock purchases totaling approximately $476 million.

Critical Accounting Policies

The Company believes the following critical accounting policies affect the more significant judgments and estimates used in the preparation of its consolidated financial statements. These policies and the other sections of the Company’s Management’s Discussion and Analysis of Results of Operations and Financial Condition have been reviewed with the Company’s Audit Committee of the Board of Directors.

Revenue Recognition — The Company generally recognizes revenue, net of sales taxes, related to products, services or rental arrangements once the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery of the equipment has occurred or the customer has taken title and risk of loss or services have been rendered, (iii) the price of the equipment or service is fixed and determinable and (iv) collectibility is reasonably assured. For engineering, procurement and construction-type contracts, revenue is generally reported on the percentage-of-completion method of accounting. Progress is primarily measured by the completion of milestones; however, progress for specific types of subsea and drilling systems contracts, which differ from our other contracts, is measured by the ratio of actual costs incurred to date on the project in relation to total estimated project costs.  Both methods require the Company to make estimates regarding the total costs of the project, which impacts the amount of gross margin the Company recognizes in each reporting period. Under the percentage-of-completion method, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue and is a significant factor in accounting for contracts. All known or anticipated losses on contracts are provided for in the period they become evident. Revenues and gross profit on contracts can be significantly affected by change orders that may be approved subsequent to completion of related work. If it is not probable that costs will be recovered through a change in contract price, the costs attributable to change orders are treated as contract costs without incremental revenue. If it is probable that costs will be recovered through a change order, the costs are treated as contract costs and contract revenue is recognized to the extent of the lesser of the amounts management expects to recover or the costs expected to be incurred.
Factors that may affect future project costs and margins include the ability to properly execute the engineering and design phases consistent with our customers’ expectations, production efficiencies obtained, and the availability and costs of labor, materials and subcomponents.  These factors can significantly impact the accuracy of the Company’s estimates and can materially impact the Company’s future period earnings.  Approximately 31%, 31% and 26% of the Company's revenues for the years ended December 31, 2014, 2013 and 2012, respectively, were recognized under the percentage-of-completion method.

Goodwill and Intangible Assets — Cameron allocates the purchase price of acquired businesses to their identifiable tangible assets and liabilities, such as accounts receivable, inventory, property, plant and equipment, accounts payable and accrued liabilities, based on their estimated fair values.  The Company also typically allocates a portion of the purchase price to identifiable intangible assets, such as noncompete agreements, trademarks, trade names, patents, technology, customer relationships and backlog using various widely accepted valuation techniques such as discounted future cash flows and the relief-from-royalty and excess earnings methods.  Each of these methods involves level 3 unobservable market inputs.  Any remaining excess of cost over allocated fair values is recorded as goodwill.  On larger acquisitions, Cameron will typically engage third-party valuation experts to assist in determining the fair values for both the identifiable tangible and intangible assets.  Certain estimates and judgments are required in the application of the fair value techniques, including estimates of future cash flows, selling prices, replacement costs, royalty rates for use of assets, economic lives and the selection of a discount rate.

The Company reviews the carrying value of goodwill in accordance with accounting rules on impairment of goodwill, which require that the Company estimate the fair value of each of its reporting units annually, or when impairment indicators exist, and compare such amounts to their respective carrying values to determine if an impairment of goodwill is required.  The estimated fair value of each reporting unit for the 2014, 2013 and 2012 evaluations was determined using discounted future expected cash flows (level 3 unobservable inputs) consistent with the accounting guidance for fair-value measurements. Certain estimates and judgments are required in the application of the fair value models, including, but not limited to, estimates of future cash flows and the selection of a discount rate.  At December 31, 2014, the Company’s reporting units for goodwill impairment evaluation purposes were the OneSubsea, Process Systems, Surface, Drilling, Valves and Measurement businesses. Prior to the fourth quarter of 2014, there were five reporting units within the V&M segment (now combined into two reporting units based on changes in management’s reporting structure during the fourth quarter of 2014).  Those reporting units included $311 million of goodwill.  The Company performed a goodwill impairment test before and after the change in V&M’s reporting units and concluded there was no impairment.

Generally, the Company conducts its goodwill impairment review during the first quarter of each annual period.  Due to the significant drop in commodity prices during the latter half of 2014 and the reorganization of the Company’s reporting structure, as described above, the Company made an additional evaluation of goodwill for impairment during the fourth quarter of 2014 based upon macro factors that existed at that point in time.  The fair value of our Process Systems reporting unit was estimated to be 10% to 15% higher than its carrying value as part of that evaluation.  The estimated fair value for Process Systems was based on forecasted timing and success in receiving new major project awards in 2015 and beyond, the pricing and profitability of those new awards and further improvements in revenue growth and profitability rates from those achieved historically.  Should our expectations prove to be incorrect due to (i) further declines in oil and gas prices and continued instability in the worldwide energy markets, (ii)  unanticipated delays occurring in project awards, including unplanned project cancellations, or, (iii) an increase in interest rates, our prior estimates of future earnings, cash flows and fair value of the Process Systems business would be negatively impacted, which could lead to an impairment of goodwill for that reporting unit, possibly even as early as our annual evaluation during the first quarter of 2015.  Goodwill associated with the Process Systems reporting unit at December 31, 2014 was approximately $571 million.

Intangible assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.  In such an event, the Company will determine the fair value of the asset using an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist.  If an impairment has occurred, the Company will recognize a loss for the difference between the carrying value and the estimated fair value of the intangible asset. Additional information relating to the Company’s goodwill and intangible assets may be found in Note 7 of the Notes to Consolidated Financial Statements.  Information relating to previous impairments of intangible assets may be found in Note 4 of the Notes to Consolidated Financial Statements.
Contingencies — The Company accrues for costs relating to litigation when such liabilities become probable and reasonably estimable. Such estimates may be based on advice from third parties, amounts specified by contract, amounts designated by legal statute or management’s judgment, as appropriate. Revisions to contingent liabilities are reflected in income in the period in which different facts or information become known or circumstances change that affect the Company’s previous assumptions with respect to the likelihood or amount of loss. Amounts paid upon the ultimate resolution of contingent liabilities may be materially different from previous estimates and could require adjustments to the estimated reserves to be recognized in the period such new information becomes known.  See Note 20 of the Notes to Consolidated Financial Statements.

Uncertain Tax Positions — The Company accounts for uncertainties in its income tax positions in accordance with income tax accounting rules.  Rulings from tax authorities on the validity and amounts allowed for uncertain tax positions taken in current and previous income tax filings could impact the Company’s estimate of the value of its uncertain tax positions in those filings.  Changes in the Company’s estimates are recognized as an increase or decrease in income tax expense in the period determined.  See Note 13 of the Notes to Consolidated Financial Statements for further information.

Pension and Postretirement Benefits Accounting — The Company recognizes the funded status of its defined benefit pension and other postretirement benefit plans in its Consolidated Balance Sheets. The measurement date for all of the Company’s plans was December 31, 2014.  As described more fully in Note 9 of the Notes to Consolidated Financial Statements, the assumptions used in calculating the pension amounts recognized in the Company’s consolidated financial statements include discount rates, interest costs, expected return on plan assets, retirement and mortality rates, inflation rates, salary growth and other factors. The Company based the discount rate assumptions of its defined benefit pension plans on the average yields at December 31, 2014 of hypothetical high-quality bond portfolios (rated AA- or better) with maturities that approximately matched the estimated cash flow needs of the plans.  The Company’s inflation assumptions were based on an evaluation of external market indicators. The expected rates of return on plan assets were based on historical experience and estimated future investment returns taking into consideration anticipated asset allocations, investment strategy and the views of various investment professionals.  During 2014, plan assets increased in value by approximately $23 million.  The difference between this actual return and an estimated growth in the value of those assets of $27 million will be deferred in accumulated other elements of comprehensive income and amortized as an increase to expense over the remaining service life of the plan participants. Retirement and mortality rates were based primarily on actuarial tables that were expected to best approximate actual plan experience. In accordance with the accounting requirements for retirement plans, actual results that differ from pension and postretirement benefit plan assumptions are recorded in accumulated other elements of comprehensive income as a net actuarial gain or loss and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation in future periods. At December 31, 2014, the Company had a net after-tax accumulated actuarial loss, totaling $104 million, that will be amortized as an increase in future pension expense.  While the Company believes the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension obligations and future expense.

The following table illustrates the sensitivity to a change in certain assumptions used in (i) the calculation of pension expense for the year ending December 31, 2015 and (ii) the calculation of the projected benefit obligation (PBO) at December 31, 2014 for the Company’s most significant pension plan, the United Kingdom pension plan:

(dollars in millions)
 
Increase (decrease)
in 2015 pre-tax
pension expense
  
Increase (decrease)
in PBO at
December 31, 2014
 
     
Change in Assumption:    
25 basis point decrease in discount rate $(1) $15 
25 basis point increase in discount rate $(4) $(14)
25 basis point decrease in expected return on assets $(1) $ 
25 basis point increase in expected return on assets $(3) $ 
Forward-looking Statement Disclaimer

In addition to the historical data contained herein, this Annual Report, including the information set forth in the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report, may include forward-looking statements regarding future market strength, customer spending and order levels, revenues and earnings of the Company, as well as expectations regarding equipment deliveries, margins, profitability, the ability to control and reduce raw material, overhead and operating costs, cash generated from operations, capital expenditures and the use of existing cash balances and future anticipated cash flows made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company’s actual results may differ materially from those described in any forward-looking statements. Any such statements are based on current expectations of the Company’s performance and are subject to a variety of factors, some of which are not under the control of the Company, but which can affect the Company’s results of operations, liquidity or financial condition. Such factors may include overall demand for, and pricing of, the Company’s products; the size and timing of orders; the Company’s ability to successfully execute large subsea and drilling projects it has been awarded; the possibility of cancellations of orders in backlog; the Company’s ability to convert backlog into revenues on a timely and profitable basis; warranty and product liability claims; the impact of acquisitions the Company has made or may make; the potential impairment of goodwill related to such acquisitions; changes in the price of (and demand for) oil and gas in both domestic and international markets; raw material costs and availability; political and social issues affecting the countries in which the Company does business; fluctuations in currency markets worldwide; and variations in global economic activity. In particular, current and projected oil and gas prices historically have generally directly affected customers’ spending levels and their related purchases of the Company’s products and services. As a result, changes in oil and gas price expectations may impact the demand for the Company’s products and services and the Company’s financial results. See additional factors discussed in “Factors That May Affect Financial Condition and Future Results” contained herein.

Because the information herein is based solely on data currently available, it is subject to change as a result of, among other things, changes in conditions over which the Company has no control or influence, and should not therefore be viewed as assurance regarding the Company’s future performance. Additionally, the Company is not obligated to make public disclosure of such changes unless required under applicable disclosure rules and regulations.

Estimates in Financial Statements

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, estimates of total contract profit or loss on certain long-term production contracts, estimated losses on accounts receivable, estimated realizable value on excess and obsolete inventory, contingencies (including tax contingencies, estimated liabilities for litigation exposures and liquidated damages), estimated warranty costs, estimates related to pension accounting, estimates used to determine fair values in purchase accounting, estimates related to the fair value of reporting units for purposes of assessing goodwill for impairment and estimates related to deferred tax assets and liabilities, including valuation allowances on deferred tax assets. Actual results could differ materially from these estimates. The Company bases its estimates on historical experience and on various other assumptions that the Company believes are reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions.
Contractual Obligations and Other Commercial Commitments

The following summarizes the Company’s significant cash contractual obligations and other commercial commitments for the next five years as of December 31, 2014.

(dollars in millions)      Payments Due by Period 
Contractual Obligations Total  
Less Than
1 Year
  
1 – 3
Years
  
4 – 5
Years
  
After 5
Years
 
           
Debt, including interest payments (a) $4,728  $373  $763  $655  $2,937 
Capital lease obligations (b)  120   17   27   14   62 
Operating leases  742   102   168   122   350 
Purchase obligations (c)  1,778   1,743   33   2    
Minimum required contributions to funded defined benefit pension plans (d)  12   12          
Benefit payments expected for unfunded pension and postretirement benefit plans (U.S. only)  11   2   3   2   4 
Liabilities for uncertain tax benefits (e)  96   96          
                     
Total contractual cash obligations $7,487  $2,345  $994  $795  $3,353 

(a)For purposes of this table, the outstanding commercial paper of $201 million at December 31, 2014 is assumed to be retired upon maturity in 2015.  However, the Company could choose to refinance this amount, or any amount up to $500 million, to avoid repayment during the next five years or beyond under certain conditions.  See Note 11 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information.
(b)Payments shown include interest.
(c)Represents outstanding purchase orders entered into in the ordinary course of business.
(d)The Company does not estimate its future minimum required contributions beyond one year.
(e)The balance shown represents the current portion of the Company’s liability for uncertain tax benefits at December 31, 2014. The remaining noncurrent balance totaling $1 million has been excluded from the table as the Company cannot reasonably estimate the timing of the associated future cash outflows.

(dollars in millions)
 Amount of Commitment Expiration by Period 
Other Unrecorded Commercial
Commitments and Off-Balance
Sheet Arrangements
 
Total
Commitment
  
Less Than
1 Year
  
1 - 3
Years
  
4 – 5
Years
  
After 5
Years
 
           
Committed lines of credit available as of year-end $1,740  $136  $1,604  $  $ 
Standby letters of credit and bank guarantees  1,108   457   392   240   19 
Financial letters of credit  45   13      32    
Insurance bonds  28   28          
Other financial guarantees  7   1         6 
                     
Total commercial commitments $2,928  $635  $1,996  $272  $25 
The Company secures certain contractual obligations under various agreements with its customers or other parties through the issuance of letters of credit or bank guarantees. The Company has various agreements with financial institutions to issue such instruments. At December 31, 2014, the Company had $1.1 billion of letters of credit and bank guarantees outstanding in connection with the delivery, installation and performance of the Company’s products. Additional letters of credit and guarantees are outstanding at December 31, 2014 in connection with certain financial obligations of the Company. Should these facilities become unavailable to the Company, the Company’s operations and liquidity could be negatively impacted. Circumstances which could result in the withdrawal of such facilities include, but are not limited to, deteriorating financial performance of the Company (which could be caused by operating issues within the Company or weakness in the overall energy markets), deteriorating financial condition of the financial institutions providing such facilities, overall constriction in the credit markets, catastrophic accidents in the energy industry which could cause a contraction in the level of credit extended to the industry, or rating downgrades of the Company.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is currently exposed to market risk from changes in foreign currency rates and changes in interest rates. A discussion of the Company’s market risk exposure in financial instruments follows.

Foreign Currency Exchange Rates

A large portion of the Company’s operations consist of manufacturing and sales activities in foreign jurisdictions, principally in Europe, Canada, West Africa, the Middle East, Latin America, China and other countries in the Pacific Rim. As a result, the Company’s financial performance may be affected by changes in foreign currency exchange rates in these markets. Overall, for those locations where the Company is a net receiver of local non-U.S. dollar currencies, Cameron generally benefits from a weaker U.S. dollar with respect to those currencies. Alternatively, for those locations where the Company is a net payer of local non-U.S. dollar currencies, a weaker U.S. dollar with respect to those currencies will generally have an adverse impact on the Company’s financial results. The impact on the Company’s financial results of gains or losses arising from foreign currency denominated transactions, if material, have been described under “Results of Operations” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations for the periods shown.

In order to mitigate the effect of exchange rate changes, the Company will often structure sales contracts to provide for collections from customers in the currency in which the Company incurs its manufacturing costs. In certain instances, the Company will enter into foreign currency forward contracts to hedge specific large anticipated receipts or disbursements in currencies for which the Company does not traditionally have fully offsetting local currency expenditures or receipts. The Company was party to a number of long-term foreign currency forward contracts at December 31, 2014. The purpose of the majority of these contracts was to hedge large anticipated non-functional currency cash flows on major subsea, drilling, valve or other equipment contracts involving the Company’s United States operations and various wholly-owned international subsidiaries. Many of these contracts have been designated as and are accounted for as cash flow hedges, with changes in the fair value of those contracts recorded in accumulated other comprehensive income (loss) in the period such change occurs.  Certain other contracts, many of which are centrally managed, are intended to offset other foreign currency exposures but have not been designated as hedges for accounting purposes and, therefore, any change in the fair value of those contracts are reflected in earnings in the period such change occurs.  The Company expects to expand its use of such contracts in the future.

Capital Markets and Interest Rates

The Company is subject to interest rate risk on its variable-interest rate and commercial paper borrowings. Variable-rate debt, where the interest rate fluctuates periodically, exposes the Company’s cash flows to variability due to changes in market interest rates. Additionally, the fair value of the Company’s fixed-rate debt changes with changes in market interest rates.

The fair values of the 1.15% and 1.4% 3-year Senior Notes, the 3.6%, 3.7%, 4.0%, 4.5% and 6.375% 10-year Senior Notes and the 5.125%, 5.95% and 7.0% 30-year Senior Notes are principally dependent on prevailing interest rates.   The fair value of the commercial paper is expected to approximate its book value.

The Company has various other long-term debt instruments, but believes that the impact of changes in interest rates in the near term will not be material to these instruments.

The Company has performed a sensitivity analysis to determine how market interest rate changes might affect the fair value of its debt. This analysis is inherently limited because it represents a singular, hypothetical set of assumptions. Actual market movements may vary significantly from the assumptions. The effects of market movements may also directly or indirectly affect the Company’s assumptions and its rights and obligations not covered by the sensitivity analysis. Fair value sensitivity is not necessarily indicative of the ultimate cash flow or the earnings effect from the assumed market rate movements.

An instantaneous one-percentage-point decrease in interest rates across all maturities and applicable yield curves would have increased the fair value of the Company’s fixed-rate debt positions by approximately $238 million at December 31, 2014 ($57 million at December 31, 2013), whereas a one-percentage-point increase in interest rates would have decreased the fair value of the Company’s fixed-rate debt by $206 million at December 31, 2014 ($100 million at December 31, 2013).  This analysis does not reflect the effect that increasing or decreasing interest rates would have on other items, such as new borrowings, nor the impact they would have on interest expense and cash payments for interest.

Derivatives Activity

Total gross volume bought (sold) by notional currency and maturity date on open derivative contracts at December 31, 2014 was as follows:

    Notional Amount - Buy  Notional Amount - Sell 
(in millions)
 2015  2016  2017  Total  2015  2016  Total 
               
Foreign exchange forward contracts -              
Notional currency in:
              
Euro  200   14      214   (10)  (1)  (11)
Malaysian ringgit  377   51      428   (29)     (29)
Norwegian krone  895   117   4   1,016   (96)  (44)  (140)
Pound Sterling  110   5      115   (22)  (1)  (23)
U.S. dollar  60         60   (635)  (47)  (682)
                             
Foreign exchange option contracts -                            
Notional currency in:
                            
U.S. dollar  87         87          

As described further in Note 19 of the Notes to Consolidated Financial Statements, the net fair value of the Company’s outstanding derivatives was a $99 million liability to the Company at December 31, 2014 ($19 million benefit at December 31, 2013).

Fair Value of Financial Instruments

The Company had approximately $1.5 billion of cash equivalents and $113 million of short-term investments at December 31, 2014.  Cash equivalents represent highly liquid investments which are readily convertible to cash and have maturities of three months or less at the time of purchase.  Short-term investments have original maturities of more than three months but less than one year.  Certain of these investments are valued based upon quoted or estimated market prices which represent levels 1 and 2 market inputs.

The fair value of the Company’s foreign exchange forward contracts were based on quoted exchange rates for the respective currencies applicable to similar instruments (level 2 observable market inputs).

The Company’s international pension plans have assets available to fund future pension obligations totaling $455 million at December 31, 2014 ($432 million at December 31, 2013).  The majority of these assets are invested in debt and equity securities or mutual funds, which were valued based on quoted market prices for an individual asset (level 1 market inputs), or mutual fund unit values, which were based on the fair values of the individual securities that the fund had invested in (level 2 observable market inputs).  A certain portion of the assets were invested in insurance contracts, real estate and other investments, which were valued based on level 3 unobservable inputs (see Note 9 of the Notes to Consolidated Financial Statements for further information).

The values of these assets are subject to change, based generally on changes in market conditions involving foreign exchange rates, interest rates and debt and equity security investment pricing.
43

ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company maintains a system of internal controls that is designed to provide reasonable but not absolute assurance as to the reliable preparation of the consolidated financial statements. The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of errors or fraud, if any, within Cameron have been detected.

The control environment of Cameron is the foundation for its system of internal controls over financial reporting and is embodied in the Company’s Standards of Conduct. It sets the tone of the Company’s organization and includes factors such as integrity and ethical values. The Company’s internal controls over financial reporting are supported by formal policies and procedures that are reviewed, modified and improved as changes occur in the Company’s business or as otherwise required by applicable rule-making bodies.

The Audit Committee of the Board of Directors, which is composed solely of outside directors, meets periodically with members of management, the internal audit department and the independent registered public accountants to review and discuss internal controls over financial reporting and accounting and financial reporting matters. The independent registered public accountants and the internal audit department report to the Audit Committee and accordingly have full and free access to the Audit Committee at any time.

Assessment of Internal Control Over Financial Reporting

Cameron’s management is responsible for establishing and maintaining adequate internal control (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) over financial reporting.

Management conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework established in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework). This evaluation included a review of the documentation surrounding the Company’s financial controls, an evaluation of the design effectiveness of these controls, testing of the operating effectiveness of these controls and a conclusion on this evaluation. Although there are inherent limitations in the effectiveness of any system of internal controls over financial reporting – including the possibility of the circumvention or overriding of controls – based on management’s evaluation, management has concluded that the Company’s internal controls over financial reporting were effective as of December 31, 2014, based on the framework established in “Internal Control – Integrated Framework” (1992 framework).  However, because of changes in conditions, it is important to note that internal control system effectiveness may vary over time.

Ernst & Young LLP, an independent registered public accounting firm that has audited the Company’s financial statements as of and for the three-year period ended December 31, 2014, has issued a report on their audit of management’s internal control over financial reporting, which is included herein.

/s/ Jack B. Moore
Jack B. Moore
Chief Executive Officer
Date:  February 20, 2015
/s/ Charles M. Sledge
Charles M. Sledge
Senior Vice President and Chief Financial Officer
Date:  February 20, 2015
44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Cameron International Corporation

We have audited the internal control over financial reporting of Cameron International Corporation (the Company) as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Cameron International Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, basedCode on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2014 and 2013, and the related statements of consolidated results of operations, comprehensive income, cash flows and changes in stockholders’ equity for each of the three years in the period ended December 31, 2014 and our report dated February 20, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Houston, Texas
February 20, 2015
45

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Cameron International Corporation

We have audited the accompanying consolidated balance sheets of Cameron International Corporation (the Company) as of December 31, 2014 and 2013, and the related statements of consolidated results of operations, comprehensive income, cash flows and changes in stockholders’ equity for each of the three years in the period ended December 31, 2014.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cameron International Corporation at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated February 20, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Houston, Texas
February 20, 2015
46

Consolidated Results of Operations

  Year Ended December 31, 
(dollars in millions, except per share data)
 2014  2013  2012 
       
Revenues $10,381  $9,138  $7,795 
             
Costs and expenses:            
Cost of sales (exclusive of depreciation and amortization shown separately below)
  7,464   6,518   5,522 
Selling and administrative expenses  1,287   1,275   1,070 
Depreciation and amortization  348   298   238 
Interest, net  129   100   90 
Other costs (see Note 4)
  73   92   33 
Total costs and expenses  9,301   8,283   6,953 
             
Income from continuing operations before income taxes  1,080   855   842 
Income tax provision  (258)  (196)  (157)
             
Income from continuing operations  822   659   685 
Income from discontinued operations, net of income taxes  26   65   66 
Net income  848   724   751 
             
Less:  Net income attributable to noncontrolling interests  37   25    
Net income attributable to Cameron stockholders $811  $699  $751 
             
             
Amounts attributable to Cameron stockholders:            
Income from continuing operations $785  $634  $685 
Income from discontinued operations  26   65   66 
Net income attributable to Cameron stockholders $811  $699  $751 
             
             
Earnings per share attributable to Cameron stockholders:
            
Basic -            
Continuing operations $3.85  $2.62  $2.78 
Discontinued operations  .13   .27   .27 
Basic earnings per share $3.98  $2.89  $3.05 
             
Diluted -            
Continuing operations $3.83  $2.60  $2.76 
Discontinued operations  .13   .27   .27 
Diluted earnings per share $3.96  $2.87  $3.03 

The Notes to Consolidated Financial Statements are an integral part of these statements.
Consolidated Comprehensive Income

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
Net income $848  $724  $751 
Foreign currency translation gain (loss)  (526)  (70)  75 
Gain (loss) on derivatives recognized in other comprehensive income:
            
Pre-tax  (109)  19   15 
Tax effect  33   (5)  (5)
(Gain) loss on derivatives reclassified from accumulated other comprehensive  income to:
            
Revenues  7   (2)  6 
Cost of sales  6   (5)  4 
Tax effect  (5)  2   
(3
)
Actuarial gains (losses) recognized in other comprehensive income:
            
Pre-tax  (43)  25   (43)
Tax effect  8   (12)  9 
Curtailment and settlement (gains) losses recognized:            
Pre-tax  (11)      
Tax effect  3       
Amortization to selling and administrative expenses of:
            
Prior service credits  (2)  (3)  (1)
Net actuarial losses  6   7   5 
Tax effect  (1)     (1)
Comprehensive income  214   680   812 
             
Comprehensive income attributable to noncontrolling interest:            
Net income  37   25    
Foreign currency translation gain (loss)  (147)  24    
Gain (loss) on derivatives recognized in other comprehensive income, net of tax  (24)  7    
(Gain) loss on derivatives reclassified from accumulated other comprehensive income, net of tax  4   (1)   
Actuarial (gains) loss recognized in other comprehensive income, net of tax  (4)  (26)   
Curtailment and settlement gains (losses) recognized in other comprehensive income, net of tax  (5)      
Amortization to selling and administrative expenses, net of tax  2   2    
Comprehensive income (loss) attributable to noncontrolling interest  (137)  31    
             
Comprehensive income attributable to Cameron $351  $649  $812 

The Notes to Consolidated Financial Statements are an integral part of these statements.
Consolidated Balance Sheets

  December 31, 
(dollars in millions, except shares and per share data)
 2014  2013 
     
Assets:    
Cash and cash equivalents $1,513  $1,813 
Short-term investments  113   41 
Receivables, net  2,389   2,719 
Inventories, net  2,929   3,133 
Other current assets  391   463 
Assets of discontinued operations  217    
Total current assets  7,552   8,169 
         
Plant and equipment, net  1,964   2,037 
Goodwill  2,461   2,925 
Intangibles, net  728   904 
Other assets  187   214 
         
Total assets $12,892  $14,249 
         
Liabilities and stockholders’ equity:        
Short-term debt $263  $297 
Accounts payable and accrued liabilities  3,748   3,883 
Accrued income taxes  168   80 
Liabilities of discontinued operations  90    
Total current liabilities  4,269   4,260 
         
Long-term debt  2,819   2,563 
Deferred income taxes  193   277 
Other long-term liabilities  167   233 
Total liabilities  7,448   7,333 
         
Commitments and contingencies        
         
Stockholders’ equity:
        
Common stock, par value $.01 per share, 400,000,000 shares authorized, 263,111,472 shares issued at December 31, 2014 and 2013  3   3 
Preferred stock, par value $.01 per share, 10,000,000 shares authorized, no shares issued or outstanding      
Capital in excess of par value  3,255   3,207 
Retained earnings  5,631   4,820 
Accumulated other elements of comprehensive income (loss)  (540)  (80)
Less: Treasury stock at cost, 68,139,027 shares at December 31, 2014 and 41,683,164 shares at December 31, 2013  (3,794)  (2,098)
Total Cameron stockholders’ equity  4,555   5,852 
Noncontrolling interests  889   1,064 
Total equity  5,444   6,916 
         
Total liabilities and stockholders’ equity $12,892  $14,249 

The Notes to Consolidated Financial Statements are an integral part of these statements.
Consolidated Cash Flows

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
Cash flows from operating activities:
      
Net income $848  $724  $751 
Adjustments to reconcile net income to net cash provided by operating activities:
            
Gain on sale of Reciprocating Compression business  (95)      
Depreciation  296   246   212 
Amortization  64   69   43 
Non-cash stock compensation expense  54   54   44 
Gain from remeasurement of prior interest in equity method investment  (8)      
Deferred income taxes and tax benefit of stock compensation plan transactions  (48)  11   (85)
Changes in assets and liabilities, net of translation, acquisitions and non-cash items:
            
Receivables  166   (470)  (144)
Inventories  (144)  (367)  (369)
Accounts payable and accrued liabilities  (17)  556   213 
Other assets and liabilities, net  77   15   18 
Net cash provided by operating activities  1,193   838   683 
             
Cash flows from investing activities:
            
Proceeds from sales and maturities of short-term investments  65   1,559   1,032 
Purchases of short-term investments  (137)  (1,082)  (1,126)
Capital expenditures  (385)  (520)  (427)
Net proceeds received from sale of Reciprocating Compression business  547       
Other dispositions (acquisitions), net of cash acquired  (7)  (11)  (349)
Proceeds received and cash acquired from formation of OneSubsea™, net of taxes paid of $80     523    
Proceeds from sales of plant and equipment  13   13   27 
Net cash provided by (used for) investing activities  96   482   (843)
             
Cash flows from financing activities:
            
Issuance of senior debt  500   747   499 
Debt issuance costs  (4)  (6)  (3)
Early retirement of senior notes  (253)      
Short-term loan borrowings (repayments), net  (34)  46   (42)
Purchase of treasury stock  (1,747)  (1,531)  (21)
Contributions from noncontrolling interest owners     62    
Distributions to noncontrolling interest owners  (42)      
Purchases of noncontrolling ownership interests     (7)   
Proceeds from stock option exercises, net of tax payments from stock compensation plan transactions  40   31   12 
Excess tax benefits from stock compensation plan transactions  6   9   11 
Principal payments on capital leases  (20)  (18)  (11)
Net cash provided by (used for) financing activities  (1,554)  (667)  445 
             
Effect of translation on cash  (35)  (26)  2 
             
Increase (decrease) in cash and cash equivalents  (300)  627   287 
Cash and cash equivalents, beginning of year  1,813   1,186   899 
             
Cash and cash equivalents, end of year $1,513  $1,813  $1,186 
The Notes to Consolidated Financial Statements are an integral part of these statements.
Consolidated Changes in Stockholders’ Equity

  Cameron Stockholders     
(dollars in millions)
 
Common
Stock
  
Capital in
Excess of
Par value
  
Retained
Earnings
  
Accumulated
Other Elements
of Comprehensive
Income (Loss)
  
Treasury
Stock
  Non-controlling Interests  
Total
 
Balance ― December 31, 2011 $3  $2,072  $3,370  $(91) $(647) $  $4,707 
Net income        751            751 
Other comprehensive income (loss)           61         61 
Non-cash stock compensation expense     44               44 
Purchase of treasury stock              (22)     (22)
Treasury stock issued under stock compensation plans     (34)        47      13 
Tax benefit of stock compensation plan transactions     12               12 
Balance ― December 31, 2012  3   2,094   4,121   (30)  (622)     5,566 
                             
Formation of OneSubsea, net of tax effects of $90     1,083            927   2,010 
Net income        699         25   724 
Other comprehensive income (loss)           (50)     6   (44)
Non-cash stock compensation expense     54               54 
Net change in treasury shares owned by participants in nonqualified deferred compensation plans              (2)     (2)
Purchase of treasury stock              (1,533)     (1,533)
Treasury stock issued under stock compensation plans     (28)        59      31 
Tax benefit of stock compensation plan transactions     10               10 
Contributions from noncontrolling interest owners                 75   75 
Purchases of noncontrolling ownership interests                 (7)  (7)
Other noncontrolling interests                 38   38 
Other     (6)              (6)
Balance ― December 31, 2013  3   3,207   4,820   (80)  (2,098)  1,064   6,916 
                             
Net income        811         37   848 
Other comprehensive income (loss)           (460)     (174)  (634)
Non-cash stock compensation expense     54               54 
Purchase of treasury stock              (1,750)     (1,750)
Treasury stock issued under stock compensation plans     (12)        54      42 
Tax benefit of stock compensation plan transactions     6               6 
Purchase of noncontrolling ownership interests                 4   4 
Distributions to noncontrolling interest owners                 (42)  (42)
Balance ― December 31, 2014 $3  $3,255  $5,631  $(540) $(3,794) $889  $5,444 

The Notes to Consolidated Financial Statements are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Summary of Major Accounting Policies

Company Operations Cameron International Corporation (Cameron or the Company) provides flow equipment products, systems and services to worldwide oil, gas and process industries through four business segments, Subsea, Surface, Drilling and Valves & Measurement (V&M). Prior to the fourth quarter of 2014, the Company reported its business segments as being Drilling & Production Systems (DPS), which included the Subsea, Drilling and Surface businesses, V&M and Process and Compression Systems, which included the Reciprocating and Centrifugal Compression businesses, both of which are now reported as discontinued operations (See Note 2 of the Notes to Consolidated Financial Statements) and the Processing Systems business.  Additional information regarding each segment may be found in Note 16 of the Notes to Consolidated Financial Statements.

Principles of Consolidation These consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. Investments in affiliated companies are accounted for using the equity method when we are able to exert significant influence over the operations of the investee.

Estimates in Financial Statements Preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, estimates of total contract profit or loss on certain long-term production contracts, estimated losses on accounts receivable, estimated realizable value on excess and obsolete inventory, contingencies (including tax contingencies, estimated liabilities for litigation exposures and liquidated damages), estimated warranty costs, estimates related to pension accounting, estimates used to determine fair values in purchase accounting, estimates related to the fair value of reporting units for purposes of assessing goodwill for impairment and estimates related to deferred tax assets and liabilities, including valuation allowances on deferred tax assets. Actual results could differ materially from these estimates.

Revenue Recognition The Company generally recognizes revenue, net of sales taxes, related to products, services or rental arrangements once the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery of the equipment has occurred or the customer has taken title and risk of loss or services have been rendered, (iii) the price of the equipment or service is fixed and determinable and (iv) collectibility is reasonably assured. For engineering, procurement and construction-type contracts, revenue is generally reported on the percentage-of-completion method of accounting. Progress is primarily measured by the completion of milestones; however, progress for specific types of subsea and drilling systems contracts, which differ from our other contracts, is measured by the ratio of actual costs incurred to date on the project in relation to total estimated project costs.  Both methods require the Company to make estimates regarding the total costs of the project, which impacts the amount of gross margin the Company recognizes in each reporting period. Under the percentage-of-completion method, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue and is a significant factor in accounting for contracts. All known or anticipated losses on contracts are provided for in the period they become evident. Revenues and gross profit on contracts can be significantly affected by change orders that may be approved subsequent to completion of related work. If it is not probable that costs will be recovered through a change in contract price, the costs attributable to change orders are treated as contract costs without incremental revenue. If it is probable that costs will be recovered through a change order, the costs are treated as contract costs and contract revenue is recognized to the extent of the lesser of the amounts management expects to recover or the costs expected to be incurred.
Approximately 31%, 31% and 26% of the Company’s revenues for the years ended December 31, 2014, 2013 and 2012, respectively, were recognized under the percentage-of-completion method.
Shipping and Handling Costs Shipping and handling costs are reflected in the caption entitled “Cost of sales (exclusive of depreciation and amortization shown separately below)” in the accompanying Consolidated Results of Operations statements.

Cash Equivalents and Short-Term Investments Cash equivalents consist of highly liquid investments which are readily convertible to cash and have maturities of three months or less at the time of purchase.  Short-term investments consist primarily of commercial paper, U.S. Treasury securities, U.S. non-governmental agency asset-backed securities and corporate debt obligations that have maturities of more than three months but less than one year.  All of our short-term investments are classified as available-for-sale and recorded at fair value, with unrealized holding gains and losses recorded as a component of accumulated other comprehensive income (loss).
Allowance for Doubtful Accounts The Company maintains allowances for doubtful accounts for estimated losses expected to result from the inability of its customers to make required payments. Such allowances are based upon several factors including, but not limited to, historical experience, the length of time an invoice has been outstanding, responses from customers relating to demands for payment and the current and projected financial condition of specific customers.

Inventories Aggregate inventories are carried at the lower of cost or market. On the basis of current costs, 54% of inventories at December 31, 2014 and 49% at December 31, 2013 are carried on the last-in, first-out (LIFO) method. For these locations, the use of LIFO results in a better matching of costs and revenues. The remaining inventories, which are generally located outside the United States and Canada, are carried on the first-in, first-out (FIFO) method. The Company provides a reserve for estimated inventory obsolescence or excess quantities on hand equal to the difference between the cost of the inventory and its estimated realizable value.

Plant and Equipment Property, plant and equipment, both owned and under capital lease, are carried at cost. Maintenance and repair costs are expensed as incurred. The cost of renewals, replacements and betterments is capitalized. The Company capitalizes software developed or obtained for internal use. Accordingly, the cost of third-party software, as well as the cost of third-party and internal personnel that are directly involved in application development activities, are capitalized during the application development phase of new software systems projects. Costs during the preliminary project stage and post-implementation stage of new software systems projects, including data conversion and training costs, are expensed as incurred. Depreciation and amortization is provided over the estimated useful lives of the related assets, or in the case of assets under capital leases, over the related lease term, if less, using the straight-line method. The estimated useful lives of the major classes of property, plant and equipment are as follows:

Estimated
Useful Lives
Buildings and leasehold improvements10-40 years
Machinery, equipment and tooling3-18 years
Office furniture, software and other3-10 years

Goodwill and Intangible Assets Cameron allocates the purchase price of acquired businesses to their identifiable tangible assets and liabilities, such as accounts receivable, inventory, property, plant and equipment, accounts payable and accrued liabilities, based on their estimated fair values.  The Company also typically allocates a portion of the purchase price to identifiable intangible assets, such as noncompete agreements, trademarks, trade names, patents, technology, customer relationships and backlog using various widely accepted valuation techniques such as discounted future cash flows and the relief-from-royalty and excess earnings methods.  Each of these methods involves level 3 unobservable market inputs.  Any remaining excess of cost over allocated fair values is recorded as goodwill.  On larger acquisitions, Cameron will typically engage third-party valuation experts to assist in determining the fair values for both the identifiable tangible and intangible assets.  Certain estimates and judgments are required in the application of the fair value techniques, including estimates of future cash flows, selling prices, replacement costs, royalty rates for use of assets, economic lives and the selection of a discount rate.

The Company reviews the carrying value of goodwill in accordance with accounting rules on impairment of goodwill, which require that the Company estimate the fair value of each of its reporting units annually, or when impairment indicators exist, and compare such amounts to their respective carrying values to determine if an impairment of goodwill is required.  The estimated fair value of each reporting unit for the 2014, 2013 and 2012 evaluations was determined using discounted future expected cash flows (level 3 unobservable inputs) consistent with the accounting guidance for fair-value measurements. Certain estimates and judgments are required in the application of the fair value models, including, but not limited to, estimates of future cash flows and the selection of a discount rate.  At December 31, 2014, the Company’s reporting units for goodwill impairment evaluation purposes were the OneSubsea, Process Systems, Surface, Drilling, Valves and Measurement businesses. Prior to the fourth quarter of 2014, there were five reporting units within the V&M segment (now combined into two reporting units based on changes in management’s reporting structure during the fourth quarter of 2014).  Those reporting units included $311 million of goodwill.  The Company performed a goodwill impairment test before and after the change in V&M’s reporting units and concluded there was no impairment.

Generally, the Company conducts its goodwill impairment review during the first quarter of each annual period.  Due to the significant drop in commodity prices during the latter half of 2014 and the reorganization of the Company’s reporting structure, as described above, the Company made an additional evaluation of goodwill for impairment during the fourth quarter of 2014 based upon macro factors that existed at that point in time.  The fair value of our Process Systems reporting unit was estimated to be 10% to 15% higher than its carrying value as part of that evaluation.  The estimated fair value for Process Systems was based on forecasted timing and success in receiving new major project awards in 2015 and beyond, the pricing and profitability of those new awards and further improvements in revenue growth and profitability rates from those achieved historically.  Should our expectations prove to be incorrect due to (i) further declines in oil and gas prices and continued instability in the worldwide energy markets, (ii)  unanticipated delays occurring in project awards, including unplanned project cancellations, or, (iii) an increase in interest rates, our prior estimates of future earnings, cash flows and fair value of the Process Systems business would be negatively impacted, which could lead to an impairment of goodwill for that reporting unit, possibly even as early as our annual evaluation during the first quarter of 2015.  Goodwill associated with the Process Systems reporting unit at December 31, 2014 was approximately $571 million.
The Company’s intangible assets, excluding goodwill, represent purchased patents, trademarks, customer relationships and other identifiable intangible assets. The majority of intangible assets are amortized on a straight-line basis over the years expected to be benefited, generally ranging from 5 to 28 years. Such intangibles are tested for recoverability whenever events or changes in circumstances indicate that their carrying value may not be recoverable. As many areas of the Company’s business rely on patents and proprietary technology, it has followed a policy of seeking patent protection both inside and outside the United States for products and methods that appear to have commercial significance. The costs of developing any intangibles internally, as well as costs of defending such intangibles, are expensed as incurred. No material impairment of intangible assets was required during the years ended December 31, 2014, 2013 or 2012, except as reflected in Note 4 of the Notes to Consolidated Financial Statements.

Long-Lived Assets — In accordance with accounting rules for the impairment or disposal of long-lived assets, such assets, excluding goodwill and indefinite-lived intangibles, to be held and used by the Company are reviewed to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, the Company bases its evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate the carrying amount of the asset may not be recoverable, the Company determines whether an impairment has occurred through the use of an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset. Assets are classified as held for sale when the Company has a plan, approved by the appropriate levels of management, for disposal of such assets and those assets are stated at the lower of carrying value or estimated fair value less estimated costs to sell.  No material impairment of long-lived assets was required during the years ended December 31, 2014, 2013 or 2012.

Product Warranty — Estimated warranty costs are accrued either at the time of sale based upon historical experience or, in some cases, when specific warranty problems are encountered. Adjustments to the recorded liability are made periodically to reflect actual experience.

Contingencies — The Company accrues for costs relating to litigation when such liabilities become probable and reasonably estimable. Such estimates may be based on advice from third parties, amounts specified by contract, amounts designated by legal statute or management’s judgment, as appropriate. Revisions to contingent liabilities are reflected in income in the period in which different facts or information become known or circumstances change that affect the Company’s previous assumptions with respect to the likelihood or amount of loss. Amounts paid upon the ultimate resolution of contingent liabilities may be materially different from previous estimates and could require adjustments to the estimated reserves to be recognized in the period such new information becomes known.

Income Taxes — The asset and liability approach is used to account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Income tax expense includes U.S. and foreign income taxes, including U.S. federal taxes on undistributed earnings of foreign subsidiaries to the extent such earnings are planned to be remitted. Taxes are not provided on the translation component of comprehensive income since the effect of translation is not considered to modify the amount of the earnings that are planned to be remitted.

A valuation allowance is provided to offset any net deferred tax asset, if, based upon available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.  Interest related to accruals for uncertain tax positions is reflected as a component of interest expense in the Consolidated Results of Operations statement. Penalties on a tax position taken by the Company are reflected as a component of income tax expense in the Consolidated Results of Operations statement. See Note 13 of the Notes to Consolidated Financial Statements for further discussion of the Company’s income taxes.

Environmental Remediation and Compliance — Environmental remediation and postremediation monitoring costs are accrued when such obligations become probable and reasonably estimable. Such future expenditures are not discounted to their present value.
Pension and Postretirement Benefits Accounting — The Company recognizes the funded status of its defined benefit pension and other postretirement benefit plans in its Consolidated Balance Sheets.  The measurement date for all of the Company’s plans was December 31, 2014.  See Note 9 of the Notes to Consolidated Financial Statements for further information.

Stock-Based Compensation — At December 31, 2014, the Company had grants outstanding under various stock-based employee compensation plans, which are described in further detail in Note 10 of the Notes to Consolidated Financial Statements. Compensation expense for the Company’s stock-based compensation plans is measured using the fair value method required by accounting rules on stock compensation. Under this guidance, the fair value of stock option grants and restricted stock unit awards is amortized to expense using the straight-line method over the shorter of the vesting period or the remaining employee service period.

Derivative Financial Instruments — The Company recognizes all derivative financial instruments as assets and liabilities on a gross basis and measures them at fair value.  Hedge accounting is only applied when the derivative is deemed highly effective at offsetting changes in anticipated cash flows of the hedged item or transaction. Changes in fair value of derivatives that are designated as cash flow hedges are deferred in accumulated other elements of comprehensive income (loss) until the underlying transactions are recognized in earnings, at which time any deferred hedging gains or losses are reclassified to earnings in the same income statement caption as impacted by the hedged item. Any ineffective portion of the change in the fair value of a derivative used as a cash flow hedge is recorded in earnings as incurred. The amounts recorded in earnings from ineffectiveness for the years ended December 31, 2014, 2013 and 2012 have not been material. The Company may at times also use forward or option contracts to hedge certain other foreign currency exposures. These contracts are not designated as hedges under the accounting guidance described above.  Therefore, the changes in fair value of these contracts are recognized in earnings as they occur and offset gains or losses on the related exposures.

Foreign Currency — For most subsidiaries and branches outside the U.S., the local currency is the functional currency.  The financial statements of these subsidiaries and branches are translated into U.S. dollars as follows: (i) assets and liabilities at year-end exchange rates; (ii) income and expenses at monthly average exchange rates or exchange rates in effect on the date of the transaction; and (iii) stockholders’ equity at historical exchange rates. For those subsidiaries where the local currency is the functional currency, the resulting translation adjustment is recorded as a component of accumulated other elements of comprehensive income (loss) in the accompanying Consolidated Balance Sheets.

For certain other subsidiaries and branches, operations are conducted primarily in currencies other than the local currencies, which are therefore the functional currency. Non-functional currency monetary assets and liabilities are remeasured at ending exchange rates. Revenue, expense and gain and loss accounts of these foreign subsidiaries and branches are remeasured at average exchange rates or exchange rates in effect on the date of the transaction. Non-functional currency non-monetary assets and liabilities, and the related revenue, expense, gain and loss accounts are remeasured at historical rates.

Foreign currency gains and losses arising from monetary transactions denominated in a currency other than the functional currency of the entity involved are included in income. The effects of foreign currency transactions were a gain of $22 million for the year ended December 31, 2014, a gain of less than $1 million for the year ended December 31, 2013 and a loss of $12 million for the year ended December 31, 2012.

Reclassifications and Revisions — Certain prior year amounts have been reclassified to conform to the current year presentation.

Note 2: Discontinued Operations

Effective June 1, 2014, the Company completed the sale of its Reciprocating Compression business to General Electric for gross cash consideration of approximately $550 million, before transaction costs.

On August 18, 2014, the Company announced that it had entered into a definitive agreement to sell its Centrifugal Compression business to Ingersoll Rand for gross cash consideration of $850 million, subject to closing adjustments.  The sale was completed effective January 1, 2015.
The Company’s historical consolidated Results of Operations statement has been retrospectively revised to reflect the results of operations for both businesses as discontinued operations for all periods presented.  Summarized financial information relating to these businesses is shown below:

  
Year Ended December 31,
 
(dollars in millions) 2014  2013  2012 
       
Revenues $428  $701  $707 
Cost of sales (excluding depreciation and amortization)  (306)  (498)  (503)
All other costs  (94)  (105)  (108)
Gain on sale of the Reciprocating Compression business, before tax  95       
Income before income taxes  123   98   96 
Income tax provision  (97)  (33)  (30)
Income from discontinued operations, net of income taxes $26  $65  $66 

The gain on the sale of the Reciprocating Compression business was determined as follows (dollars in millions):

Sales price $550 
Net assets sold  (442)
Transaction and other costs associated with the sale  (13)
Pre-tax gain  95 
Tax provision(1)
  (88)
Gain on sale $7 
(1)The tax provision associated with the gain on the sale of the Reciprocating Compression business was approximately $88 million, which was impacted by nondeductible goodwill of approximately $192 million included in the total net assets sold.

The net assets sold of the Reciprocating Compression business were as follows (dollars in millions):

Accounts receivable $79 
Inventory  122 
Goodwill  214 
All other  27 
Net assets sold $442 

Assets and liabilities of the Centrifugal Compression business held for sale in the Company’s Consolidated Balance Sheet at December 31, 2014 were as follows:

(dollars in millions) 
December 31,
2014
 
Receivables, net $37 
Inventories, net  86 
Other current assets  14 
Plant and equipment, net  45 
Goodwill  35 
Assets of discontinued operations $217 
     
Accounts payable, accrued and other current liabilities $89 
Other long-term liabilities  1 
Liabilities of discontinued operations $90 
Note 3: Acquisitions and OneSubsea

Douglas Chero —During the third quarter of 2013, the Company’s V&M segment acquired Douglas Chero, an Italian valve manufacturer, for approximately $20 million, net of cash acquired.  The acquisition was made to support the Company’s international growth strategy by expanding its downstream industrial valve offerings.  Douglas Chero’s results of operations have been included in the V&M segment since the date of acquisition.

OneSubsea —On June 30, 2013, Cameron and Schlumberger Limited completed the formation of OneSubsea, a venture established to manufacture and develop products, systems and services for the subsea oil and gas market.  Cameron contributed its existing subsea business unit and received $600 million from Schlumberger, while Schlumberger contributed its Framo, Surveillance, Flow Assurance and Power and Controls businesses, which included an additional $3 million of cash.  As 60% owner, Cameron manages the venture and reflects a noncontrolling interest in its financial statements for Schlumberger’s 40% interest in the venture.

Under the purchase method of accounting, the assets and liabilities of the Schlumberger businesses contributed to OneSubsea were reflected at their estimated fair values at June 30, 2013.  The excess of the fair value of the businesses contributed by Schlumberger over the net tangible and identifiable intangible assets of those businesses was recorded as goodwill.  The OneSubsea goodwill, totaling approximately $1 billion, is not deductible for tax purposes.

Due to Cameron maintaining control of OneSubsea, the contribution of Cameron’s existing subsea business unit into the venture was recorded at historical cost and the issuance of a 40% interest in the venture to Schlumberger was reflected as an adjustment to Cameron’s paid in capital in accordance with accounting rules governing decreases in a parent’s ownership interest in a subsidiary without loss of control.  Accordingly, the direct income tax consequences were also reflected as an adjustment to paid in capital.  During the fourth quarter of 2013, the Company paid approximately $80 million in taxes associated with this transaction.

2012 Acquisitions During the fourth quarter of 2012, the Company spent $40 million, net of cash acquired, on two acquisitions, CairnToul Well Equipment Services Limited and ICI Artificial Lift, Inc. both of which were made to enhance the product and service offerings of its Surface segment.

On June 6, 2012, the Company closed on its purchase of the drilling equipment business of TTS Energy Division (“TTS”) from TTS Group ASA, a Norwegian company, for a cash payment of $248 million, net of cash acquired, subject to certain post-closing adjustments.  TTS provides high performance drilling equipment, rig packages and rig solutions for both onshore and offshore rigs to the international energy industry and its financial results have been included in the Drilling segment since the date of acquisition.

During the first quarter of 2012, the Company acquired 100% of the outstanding stock of Elco Filtration and Testing, Inc. (“Elco”), for a total purchase price of $61 million, net of cash acquired.  Elco was purchased to strengthen the Company’s wellhead product and service offerings and has been included in the Surface segment since the date of acquisition.

Approximately $250 million of goodwill was recorded as a result of the 2012 acquisitions, nearly $28 million of which is deductible for tax purposes.
Note 4: Other Costs

Other costs, net of credits, consisted of the following:

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
Goodwill impairment $40  $  $ 
Litigation costs  11   3   2 
Loss on disposal of non-core assets  10       
Impairment of identifiable intangible assets  4      18 
Costs for early retirement of debt  3       
OneSubsea formation and other acquisition and integration costs  2   60   16 
International pension curtailment and settlement costs (credits), net  (8)     7 
Gain from remeasurement of prior interest in equity method investment  (8)      
Mark-to-market impact on currency derivatives not designated as accounting  hedges  8   1   (16)
Currency devaluation     10    
Severance, restructuring and other costs  11   18   6 
             
Total other costs $73  $92  $33 

Goodwill totaling $40 million relating to the Company’s Process Systems and Equipment (PSE) reporting unit was considered to be fully impaired during the annual goodwill impairment review conducted during the first quarter of 2014.

Integration costs consist of costs incurred for the integration of the operations of certain newly acquired businesses with the existing operations of the Company, largely reflecting the costs associated with converting legacy systems to the Company’s SAP information systems.
Note 5: Receivables

Receivables consisted of the following:

  December 31, 
(dollars in millions)
 2014  2013 
     
Trade receivables $1,678  $2,015 
Costs and estimated earnings in excess of billings on uncompleted contracts  621   582 
Other receivables  122   143 
Allowance for doubtful accounts  (32)  (21)
         
Total receivables $2,389  $2,719 

Note 6: Inventories

Inventories consisted of the following:

  December 31, 
(dollars in millions)
 2014  2013 
     
Raw materials $159  $238 
Work-in-process  827   894 
Finished goods, including parts and subassemblies  2,150   2,208 
Other  24   22 
   3,160   3,362 
Excess of current costs over LIFO costs  (86)  (120)
Allowance for obsolete and excess inventory  (145)  (109)
         
Total inventories $2,929  $3,133 

Note 7: Plant and Equipment, Goodwill and Intangibles

Plant and equipment consisted of the following:

  December 31, 
(dollars in millions)
 2014  2013 
     
Land and land improvements $130  $132 
Buildings  726   744 
Machinery and equipment  1,682   1,662 
Tooling, dies, patterns, etc.  179   208 
Office furniture & equipment  212   210 
Capitalized software  370   348 
Assets under capital leases  120   107 
Construction in progress  127   231 
All other  34   28 
   3,580   3,670 
Accumulated depreciation  (1,616)  (1,633)
         
Total plant and equipment, net $1,964  $2,037 

Changes in goodwill during 2014 were as follows:

(dollars in millions)
 Subsea  Surface  Drilling  Valves & Measurement  Discontinued Operations  Total 
             
Balance at December 31, 2013 $1,654  $199  $505  $318  $249  $2,925 
Discontinued operations              (249)  (249)
Impairment     (40)           (40)
Acquisitions     20            20 
Adjustments to the purchase price allocation for prior year acquisitions  19         (1)     18 
Translation effect of currency changes and other  (197)  (6)  (4)  (6)     (213)
                         
Balance at December 31, 2014 $1,476  $173  $501  $311  $  $2,461 
Intangibles consisted of the following:

  December 31, 
(dollars in millions)
 2014  2013 
     
Customer relationships $459  $519 
Patents and technology  382   426 
Trademarks  68   69 
Noncompete agreements, engineering drawings and other  80   103 
   989   1,117 
Accumulated amortization  (261)  (213)
         
Total intangibles, net $728  $904 

Amortization expense associated with the Company’s amortizable intangibles recorded as of December 31, 2014 is expected to approximate $45 million, $45 million, $44 million, $42 million, and $38 million for the years ending December 31, 2015, 2016, 2017, 2018 and 2019, respectively.

Note 8: Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following:

  December 31, 
(dollars in millions)
 2014  2013 
     
Trade accounts payable and accruals $1,084  $1,184 
Advances from customers  1,576   1,676 
Other accruals  1,088   1,023 
         
Total accounts payable and accrued liabilities $3,748  $3,883 

Note 9: Employee Benefit Plans

As of December 31, 2014, the Company sponsored separate defined benefit pension plans for employees of certain of its international subsidiaries, as well as several unfunded defined benefit arrangements for various other employee groups. The defined benefit pension plan covering employees in the United Kingdom was frozen to new entrants effective June 14, 1996.

Certain of the Company’s employees also participate in various employee welfare benefit plans, including medical, dental and prescriptions. Additionally, certain retirees based in the United States receive retiree medical, prescription and life insurance benefits. All of the welfare benefit plans, including those providing postretirement benefits, are unfunded.

During 2014, the Company communicated to employees and beneficiaries of three of its international retirement plans that it had elected to terminate the respective defined benefit plans and replace them with defined contribution plans. The final settlement payments will occur in early 2015. The Company recorded a net pre-tax curtailment gain of approximately $8 million (included in Other Costs – see Note 4 of the Notes to Consolidated Financial Statements) related to the termination of these plans.
Total net benefit plan expense (income) associated with the Company’s defined benefit pension and postretirement benefit plans consisted of the following:

  
Pension Benefits
  Postretirement Benefits 
(dollars in millions)
 2014  2013  2012  2014  2013  2012 
             
Service cost $18  $10  $3  $  $  $ 
Interest cost  20   17   15          
Expected return on plan assets  (27)  (21)  (18)         
Amortization of prior service credits  (2)  (2)     (1)  (1)  (1)
Amortization of losses (gains)  9   8   6   (1)  (1)  (1)
Curtailment gain  (12)               
Settlement loss  4      4          
Other        2          
                         
Total net benefit plan expense (income) $10  $12  $12  $(2) $(2) $(2)
Included in accumulated other elements of comprehensive income (loss) at December 31, 2014 and 2013 are the following amounts that have not yet been recognized in net periodic benefit plan cost, as well as the amounts that are expected to be recognized in net periodic benefit plan cost during the year ending December 31, 2015:

  December 31, 2014  December 31, 2013  
Year Ending
December 31, 2015
 
(dollars in millions)
 Before Tax  After Tax  Before Tax  After Tax  
Expected
Amortization
 
           
Pension benefits:
          
Prior service credits $18  $14  $22  $17  $(2)
Actuarial losses, net  (136)  (109)  (119)  (94)  10 
                     
Postretirement benefits:
                    
Prior service credits  3   2   3   2   (1)
Actuarial gains  8   5   9   6   (1)
                     
  $(107) $(88) $(85) $(69) $6 
The change in the projected benefit obligation associated with the Company’s defined benefit pension plans and the change in the accumulated benefit obligation associated with the Company’s postretirement benefit plans was as follows:

  Pension Benefits  Postretirement Benefits 
(dollars in millions)
 2014  2013  2014  2013 
         
Benefit obligation at beginning of year $489  $387  $11  $13 
Service cost  18   10       
Interest cost  20   17       
Plan participants’ contributions  1   1       
Actuarial losses (gains)  78   12   (1)  (1)
Exchange rate changes  (52)  5       
Benefit payments  (14)  (14)  (1)  (1)
Plan amendments     (21)      
Acquisitions     67       
Curtailments  (23)         
Settlements  (8)         
Other     25       
                 
Benefit obligation at end of year $509  $489  $9  $11 
The total accumulated benefit obligation for the Company’s defined benefit pension plans was $469 million and $435 million at December 31, 2014 and 2013, respectively.

The change in the plan assets associated with the Company’s defined benefit pension and postretirement benefit plans was as follows:

  Pension Benefits  Postretirement Benefits 
(dollars in millions)
 2014  2013  2014  2013 
         
Fair value of plan assets at beginning of year $432  $318  $  $ 
Actual return on plan assets  53   41       
Company contributions  27   13   1   1 
Plan participants’ contributions  1   1       
Exchange rate changes  (40)  6       
Benefit payments  (14)  (14)  (1)  (1)
Acquisitions     46       
Settlements  (8)         
Other  4   21       
                 
Fair value of plan assets at end of year $455  $432  $  $ 

The status of the Company’s underfunded defined benefit pension and postretirement benefit plans was as follows:

  Pension Benefits  Postretirement Benefits 
  December 31,  December 31, 
(dollars in millions)
 2014  2013  2014  2013 
         
Current $(1) $(1) $(1) $(2)
Non-current  (53)  (55)  (8)  (9)
                 
Underfunded status at end of year $(54) $(56) $(9) $(11)

Actual asset investment allocations for the Company’s main defined benefit pension plan in the United Kingdom, which accounts for approximately 78% of total plan assets, were as follows:

  2014  2013  2012 
       
U.K. plan:
      
Equity securities  55%  60%  54%
Fixed income debt securities, cash and other  45%  40%  46%

In each jurisdiction, the investment of plan assets is overseen by a plan asset committee whose members act as trustees of the plan and set investment policy. For the years ended December 31, 2014, 2013 and 2012, the investment strategy has been designed to approximate the performance of market indexes. The Company’s targeted allocation for the U.K. plan for 2015 and beyond is approximately 55% in equities, 40% in fixed income debt securities and 5% in real estate and other.

During 2014, the Company made contributions totaling approximately $27 million to the assets of its various defined benefit pension plans. Contributions to plan assets for 2015 are currently expected to approximate $12 million assuming no change in the current discount rate or expected investment earnings.

The assets of the Company’s pension plans are generally invested in debt and equity securities or mutual funds, which are valued based on quoted market prices for an individual asset (level 1 market inputs) or mutual fund unit values, which are based on the fair values of the individual securities that the fund has invested in (level 2 observable market inputs).  A certain portion of the assets are invested in insurance contracts, real estate and other investments, which are valued based on level 3 unobservable inputs.
The fair values of the Company’s pension plan assets by asset category at December 31, 2014 and 2013 were as follows:

  
Fair Value Based on
Quoted Prices in Active
 Markets for Identical
Assets (Level 1)
  
Fair Value Based on
Significant Other
Observable Inputs
(Level 2)
  Fair Value Based
on Significant
Unobservable Inputs
(Level 3)
  Total 
(dollars in millions)
 2014  2013  2014  2013  2014  2013  2014  2013 
                 
Cash and cash equivalents $1  $1  $  $  $  $  $1  $1 
Equity securities:
                                
U.S. equities        83   83         83   83 
Non-U.S. equities        120   125         120   125 
Bonds:
                                
Non-U.S. government bonds        117   92         117   92 
Non-U.S. corporate bonds        30   26         30   26 
Alternative investments:
                                
Insurance contracts              89   91   89   91 
Real estate and other              15   14   15   14 
                                 
Total assets $1  $1  $350  $326  $104  $105  $455  $432 

Changes in the fair value of pension plan assets determined based on level 3 unobservable inputs were as follows:

  Year Ended December 31, 
(dollars in millions)
 2014  2013 
Balance at beginning of the year $105  $28 
Purchases/sales, net  10   7 
Other plan additions     68 
Actual return on plan assets  4   3 
Currency impact  (15)  (1)
         
Balance at end of the year $104  $105 

The weighted-average assumptions associated with the Company’s defined benefit pension and postretirement benefit plans were as follows:

  
Pension Benefits
  Postretirement Benefits 
  2014  2013  2014  2013 
         
Assumptions related to net benefit costs:
        
U.S. plans:        
Discount rate  3.75%  2.75%  3.75%  2.75%
Measurement date 1/1/2014  1/1/2013  1/1/2014  1/1/2013 
                 
Foreign plans:
                
Discount rate  3.5-5.25%  2.25-6.75%      
Expected return on plan assets  2.25-6.75%  3.50-6.75%      
Rate of compensation increase  2.25-4.5%  3.0-4.5%      
Measurement date 1/1/2014  1/1/2013       
                 
Assumptions related to end-of-period benefit obligations:
                
U.S. plans:
                
Discount rate  3.25%  3.75%  3.25%  3.75%
Health care cost trend rate        7.0%  7.5%
Measurement date 12/31/2014  12/31/2013  12/31/2014  12/31/2013 
                 
Foreign plans:
                
Discount rate  2.25-4.25%  3.5-5.25%      
Rate of compensation increase  2.25-5.0%  2.25-4.5%      
Measurement date 12/31/2014  12/31/2013       

The Company’s discount rate assumptions for its U.S. postretirement benefits plan and its international defined benefit pension plans are based on the average yield of a hypothetical high quality bond portfolio with maturities that approximately match the estimated cash flow needs of the plans.

The assumptions for expected long-term rates of return on assets are based on historical experience and estimated future investment returns, taking into consideration anticipated asset allocations, investment strategies and the views of various investment professionals.

The rate of compensation increase assumption for international plans reflects local economic conditions and the Company’s compensation strategy in those locations.

The health care cost trend rate is assumed to decrease gradually from 7% to 5% by 2021 and remain at that level thereafter. A one-percentage-point increase or decrease in the assumed health care cost trend rate would not have a material impact on the service and interest cost components in 2014 or the postretirement benefit obligation as of December 31, 2014.

Amounts applicable to the Company’s pension plans with projected benefit obligations in excess of plan assets and accumulated benefit obligations in excess of plan assets were as follows:

  
Projected Benefit
Obligation in Excess
of Plan Assets
  
Accumulated Benefit
Obligation in Excess
of Plan Assets
 
  at December 31,  at December 31, 
(dollars in millions)
 2014  2013  2014  2013 
         
Fair value of applicable plan assets $455  $97  $455  $42 
Projected benefit obligation of applicable plans $509  $172       
Accumulated benefit obligation of applicable plans       $469  $84 
Future expected benefit payments are as follows:

(dollars in millions)
 Pension Benefits  Postretirement Benefits 
     
Year ending December 31:
    
2015 $68  $1 
2016 $12  $1 
2017 $12  $1 
2018 $13  $1 
2019 $14  $1 
2020 - 2024 $74  $3 

The Company’s United States-based employees who are not covered by a bargaining unit and certain others are also eligible to participate in the Cameron International Corporation Retirement Savings Plan. Under this plan, employees’ savings deferrals are partially matched in cash and invested at the employees’ discretion. The Company provides nondiscretionary retirement contributions to the Retirement Savings Plan on behalf of each eligible employee equal to 3% of their defined pay.  Eligible employees vest in the 3% retirement contributions plus any earnings after completing three years of service.  In addition, the Company provides an immediately vested matching contribution of up to 100% of the first 6% of pay contributed by each eligible employee.  Employees may contribute amounts in excess of 6% of their pay to the Retirement Savings Plan, subject to certain United States Internal Revenue Service limitations. The Company’s expense for the matching and retirement contribution for the years ended December 31, 2014, 2013 and 2012 amounted to $77 million, $77 million and $70 million, respectively. In addition, the Company provides savings or other benefit plans for employees under collective bargaining agreements and, in the case of certain international employees, as required by government mandate, which provide for, among other things, Company funding in cash based on specified formulas. Expense with respect to these various defined contribution and government-mandated plans for the years ended December 31, 2014, 2013 and 2012 amounted to $73 million, $83 million and $60 million, respectively.

Note 10: Stock-Based Compensation Plans

The Company has grants outstanding under various equity compensation plans, only one of which, the Equity Incentive Plan (EQIP), is currently available for future grants of equity compensation awards to employees and non-employee directors. Options granted under the Company’s equity compensation plans had an exercise price equal to the market value of the underlying common stock on the date of grant and all terms were fixed.

Stock-based compensation expense recognized was as follows:

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
Outstanding restricted and deferred stock units and awards $44  $40  $32 
Unvested outstanding stock options  10   14   12 
             
Total stock-based compensation expense $54  $54  $44 

The total income statement tax benefit recognized from stock-based compensation arrangements during the years ended December 31, 2014, 2013 and 2012  totaled approximately $20 million, $20 million and $17 million, respectively.

Stock options

Options with terms of seven or ten years have been granted to officers and other key employees of the Company under the EQIP plan at a fixed exercise price equal to the fair value of the Company’s common stock on the date of grant. The options generally vest in one-third increments each year on the anniversary date following the date of grant, based on continued employment.
A summary of option activity under the Company’s stock compensation plans as of and for the year ended December 31, 2014 is presented below:
Options Shares  
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value
(dollars in
millions)
 
       
Outstanding at January 1, 2014  4,197,093  $47.92   
Granted  782,779   57.71   
Exercised  (1,064,138)  40.48   
Forfeited  (3,246)  64.97   
           
Outstanding at December 31, 2014  3,912,488  $51.89   6.27  $13 
                 
Vested at December 31, 2014 or expected to vest in the future  3,899,272  $51.86   6.26  $13 
                 
Exercisable at December 31, 2014  2,471,452  $47.32   4.63  $13 

  
At
December 31, 2014
 
   
Stock-based compensation cost not yet recognized under the straight-line method (dollars in millions)
 $14 
     
Weighted-average remaining expense recognition period (in years)
  1.95 

The fair values per share of option grants for the years ended December 31, 2014, 2013 and 2012 were estimated using the Black-Scholes-Merton option pricing formula with the following weighted-average assumptions:

  Year Ended December 31, 
  2014  2013  2012 
       
Expected life (in years)
  3.3   3.2   3.2 
Risk-free interest rate  0.86%  0.67%  0.37%
Volatility  33.8%  34.3%  39.4%
Expected dividend yield  0.0%  0.0%  0.0%

The Company determined the assumptions involving the expected life of its options and volatility rates based primarily on historical data and consideration of expectations for the future.

The above assumptions and market prices of the Company’s common stock at the date of option exercises resulted in the following values:

  Year Ended December 31, 
  2014  2013  2012 
       
Grant-date fair value per option $14.51  $16.19  $15.68 
Intrinsic value of options exercised (dollars in millions)
 $26  $31  $34 
Average intrinsic value per share of options exercised $24.17  $26.30  $23.39 
Restricted and deferred stock units and awards

Grants of restricted stock units are made to officers and other key employees. The restricted stock units granted generally provide for vesting in one-third increments each year or three-year 100% cliff vesting on the third anniversary of the date of grant, based on continued employment.

Non-employee directors are entitled to receive an annual number of deferred stock units equal to a value of $250,000 determined on the day following the Company’s annual meeting of stockholders or, if a director’s election to the Board occurs between annual meetings of stockholders, the initial grant of deferred stock units is based on a pro-rata portion of the annual grant amount equal to the remaining number of months in the board year until the next annual meeting of stockholders.  These units, which have no exercise price and no expiration date, vest in one-fourth increments quarterly over the following year but cannot be converted into common stock until the earlier of termination of Board service or three years, although Board members have the ability to voluntarily defer conversion for a longer period of time.

A summary of restricted and deferred stock unit award activity under the Company’s stock compensation plans as of and for the year ended December 31, 2014 is presented below:

 
 
Restricted and Deferred Stock Units
 
Number
  
Weighted-Average
Grant Date
Fair Value
 
     
Nonvested at January 1, 2014  1,658,357  $28.22 
Granted  826,329   59.63 
Vested  (563,179)  59.82 
Forfeited  (72,825)  57.22 
         
Nonvested at December 31, 2014  1,848,682  $31.89 

  
At
December 31, 2014
 
   
Stock-based compensation cost not yet recognized under the straight-line method (dollars in millions)
 $46 
     
Weighted-average remaining expense recognition period (in years)
  1.60 

Information on restricted and deferred stock units granted and vesting during the three years ended December 31, 2014 follows:

  Year Ended December 31, 
  2014  2013  2012 
       
Number of units granted with performance conditions  174,697   185,992   211,244 
Intrinsic value of units vesting (dollars in millions)
 $34  $46  $38 
Total number of units granted  826,329   838,207   674,578 
Weighted average grant date fair value per unit $59.63  $57.95  $50.44 
The fair value of restricted and deferred stock units is determined based on the closing trading price of the Company’s common stock on the grant date.

At December 31, 2014, 11,685,001 shares were reserved for future grants of options, deferred stock units, restricted stock units and other awards. The Company may issue either treasury shares or newly issued shares of its common stock in satisfaction of these awards.
Note 11: Debt

The Company’s debt obligations were as follows:

  December 31, 
(dollars in millions)
 2014  2013 
     
Commercial paper (0.49% weighted average rate) $201  $ 
Senior notes:
        
Floating rate notes due June 2, 2014     250 
1.6% notes due April 30, 2015     250 
1.15% notes due December 15, 2016  250   250 
1.4% notes due June 15, 2017  250    
6.375% notes due July 15, 2018  450   450 
4.5% notes due June 1, 2021  250   250 
3.6% notes due April 30, 2022  250   250 
4.0% notes due December 15, 2023  250   250 
3.7% notes due June 15, 2024  250    
7.0% notes due July 15, 2038  300   300 
5.95% notes due June 1, 2041  250   250 
5.125% notes due December 15, 2043  250   250 
Unamortized original issue discount  (7)  (7)
Other debt  67   57 
Obligations under capital leases  71   60 
   3,082   2,860 
Current maturities  (263)  (297)
         
Long-term maturities $2,819  $2,563 

Senior Notes

On June 20, 2014, the Company completed the public offering of $500 million in aggregate principal amount of senior unsecured notes as follows:

$250 million principal amount of 1.4% Senior Notes due June 15, 2017, sold at an offering price of 99.951%, and
$250 million principal amount of 3.7% Senior Notes due June 15, 2024, sold at an offering price of 99.769%.

Interest on the notes is payable semiannually on June 15 and December 15 of each year, and began on December 15, 2014.  The notes may be redeemed in whole or in part by the Company prior to maturity, as provided for in the terms of each note, for an amount equal to the principal amount of the notes redeemed plus a specified make-whole premium.  All of the Company’s senior notes rank equally with the Company’s other existing unsecured and unsubordinated debt.

Utilizing proceeds from these notes, on July 21, 2014, the Company paid approximately $253 million, which included a make-whole premium plus accrued interest, to redeem early its $250 million principal amount of 1.6% Senior Notes.

During the first quarter of 2014, the Company’s Board of Directors authorized the establishment of a $500 million commercial paper program.  This program allows for issuances of commercial paper with maturities of up to 364 days to be used for general corporate purposes.  The average term of the outstanding commercial paper at December 31, 2014 was approximately 36 days.

Multicurrency Revolving Letter of Credit and Credit Facilities

The Company’s Credit Agreement dated April 14, 2008 (as amended and restated, the "Amended Credit Agreement") provides for a multi-currency borrowing capacity of $835 million and matures on June 6, 2016. Pursuant to the Amended Credit Agreement, Cameron may borrow funds at the London Interbank Offered Rate (LIBOR) plus a spread, which varies based on the Company’s current debt rating, and, if aggregate outstanding credit exposure exceeds one-half of the total facility amount, an additional fee will be incurred. At December 31, 2014, no amounts have been borrowed under the $835 million Amended Credit Agreement.
On April 11, 2014, the Company entered into a new $750 million three-year multi-currency syndicated Revolving Credit Facility expiring April 11, 2017.   Up to $200 million of this new facility may be used for letters of credit and $92 million of letters of credit issued and outstanding under a previously existing $170 million bi-lateral facility were transferred to the new Revolving Credit Facility at close and concurrently the $170 million bi-lateral facility was amended to reduce its capacity to $40 million.  The new Revolving Credit Facility contains covenants and terms consistent with the Company’s existing $835 million five-year multi-currency Revolving Credit Facility, described above, and it serves as the primary backstop to the commercial paper program.  The Company has issued letters of credit totaling $69 million under the new $750 million Revolving Credit Facility and $3 million under the $40 million bi-lateral facility, leaving $681 million and $37 million, respectively, available for future use at December 31, 2014.

Other

Other debt, some of which is held by entities located in countries with high rates of inflation, has a weighted-average interest rate of 6.5% at December 31, 2014 (6.1% at December 31, 2013).

Future maturities of the Company’s debt (excluding the remaining amount of unamortized discount and capital leases) are approximately $249 million in 2015, $269 million in 2016, $250 million in 2017, $450 million in 2018 and $1.8 billion thereafter.

In addition to the above, the Company also has other unsecured and uncommitted credit facilities available to its foreign subsidiaries to fund ongoing operating activities. Certain of these facilities also include annual facility fees.

Information on interest expensed and paid during the three years ended December 31, 2014 was as follows:

  Year Ended December 31 
(dollars in millions)
 2014  2013  2012 
       
Interest expensed $149  $115  $104 
Interest paid $142  $105  $97 
Note 12: Leases

The Company leases certain facilities, office space, vehicles, data processing and other equipment under capital and operating leases. Rental expenses for the years ended December 31, 2014, 2013 and 2012 were $115 million, $111 million and $86 million, respectively. Future minimum lease payments with respect to capital leases and operating leases with noncancelable terms in excess of one year were as follows:

  Capital  Operating 
(dollars in millions)
 Lease Payments  Lease Payments 
     
Year ending December 31:    
2015 $17  $103 
2016  15   90 
2017  12   78 
2018  8   64 
2019  6   57 
Thereafter  62   350 
         
Future minimum lease payments  120   742 
Less: amount representing interest  (49)   
         
Lease obligations at December 31, 2014 $71  $742 
Note 13: Income Taxes

The components of income from continuing operations before income taxes were as follows:

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
U.S. operations $294  $219  $664 
Foreign operations  786   636   178 
             
Income from continuing operations before income taxes $1,080  $855  $842 

The provisions for income taxes were as follows:

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
Current:
      
U.S. federal $70  $  $97 
U.S. state and local  4   11   7 
Foreign  231   166   137 
   305   177   241 
             
Deferred:
            
U.S. federal     31   (37)
U.S. state and local  (3)  2   (2)
Foreign  (44)  (14)  (45)
   (47)  19   (84)
             
Income tax provision $258  $196  $157 

The reasons for the differences between the provision for income taxes and income taxes using the U.S. federal income tax rate were as follows:

  Year Ended December 31, 
  2014  2013  2012 
       
U.S. federal statutory rate  35.0%  35.0%  35.0%
State and local income taxes     1.0   0.4 
Foreign statutory rate differential  (10.7)  (11.6)  (10.2)
Change in valuation allowance on deferred tax assets  3.4   (1.7)  6.6 
Nondeductible expenses  (0.1)  1.1   0.9 
Net U.S. tax on foreign source income  (2.9)  (3.2)  (12.2)
All other  (0.8)  2.3   (1.9)
             
Total  23.9%  22.9%  18.6%
             
Total income taxes paid (dollars in millions)
 $353  $329  $240 
Components of deferred tax assets (liabilities) were as follows:

  December 31, 
(dollars in millions)
 2014  2013 
     
Deferred tax liabilities:
    
Plant and equipment $(190) $(171)
Intangible assets  (221)  (251)
Other  (9)  (16)
Total deferred tax liabilities  (420)  (438)
         
Deferred tax assets:
        
Inventory  48   20 
Postretirement benefits other than pensions  3   12 
Reserves and accruals  160   93 
Net operating losses and tax credits  259   246 
Pensions  38   16 
Other  27   17 
         
Total deferred tax assets  535   404 
         
Valuation allowance  (79)  (59)
         
Net deferred tax assets (liabilities) $36  $(93)

Changes in the Company’s accruals for unrecognized tax benefits were as follows:

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
Balance at beginning of year $103  $121  $148 
Decreases in estimates for tax positions taken prior to the current year        (11)
Increases due to tax positions taken during the current year  6   3    
Decreases relating to settlements with tax authorities  (10)  (19)  (10)
Decreases resulting from the lapse of applicable statutes of limitation        (7)
Net increases (decreases) due to translation and interest  (2)  (2)  1 
             
Balance at end of year $97  $103  $121 

The Company has a $97 million accrual for unrecognized tax benefits at December 31, 2014, for which the majority of the uncertainties surrounding the benefits are expected to be settled during the next twelve-month period as a result of the conclusion of various income tax audits or due to the expiration of the applicable statute of limitations. The Company is not currently aware of any material amounts included as unrecognized tax benefits at December 31, 2014 that, if recognized, would not impact the Company’s future effective income tax rate.

There were no material payments for interest or penalties for the years ended December 31, 2014, 2013 or 2012. Also, there were no material accruals for unpaid interest or penalties at December 31, 2014 or 2013.

The Company and its subsidiaries file income tax returns in the United States, various domestic states and localities and in many foreign jurisdictions. The earliest years’ tax returns filed by the Company that are still subject to examination by authorities in the major tax jurisdictions are as follows:

United
States
 
United
Kingdom
 Canada France Germany Norway Singapore Italy
20112012200620122008201020102008
At December 31, 2014, the Company had net operating loss and credit carryforwards in numerous jurisdictions with various expiration periods, including certain jurisdictions which have no expiration period.  Changes in the Company’s valuation allowances against these net operating loss and credit carryforwards and other deferred tax assets were as follows:

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
Balance at beginning of year $59  $84  $30 
Valuation allowances for unutilized net operating losses and excess foreign tax credits generated in the current year  25   11   36 
Change in valuation allowances related to prior years  (2)  (16)  19 
Write-off of valuation allowances and associated deferred tax assets for certain losses that have no possibility of being utilized     (19)   
Effect of translation  (3)  (1)  (1)
             
Balance at end of year $79  $59  $84 

The Company has considered all available evidence in assessing the need for the valuation allowance, including future taxable income, future foreign source income, and ongoing prudent and feasible tax planning strategies. In the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the net deferred tax assets would be charged to income in the period such determination was made.

Tax attribute carryforwards which are available for use on future income tax returns at December 31, 2014 are as follows:

(dollars in millions)
 Domestic  Foreign  Expiration 
       
Net operating losses - regular income tax $  $381  2018 - Indefinite 
Net operating losses – state income tax $6  $   2018 – 2034 
Foreign tax credits $93  $   2016 – 2024 

The tax benefit that the Company receives with respect to certain stock compensation plan transactions is credited to capital in excess of par value and does not reduce income tax expense. This benefit amounted to $6 million, $10 million and $12 million in 2014, 2013 and 2012, respectively.

The Company considers all unremitted earnings of its foreign subsidiaries, except certain amounts primarily earned before 2003, certain amounts earned during 2009, certain amounts earned by NATCO, and amounts previously subjected to tax in the U.S., to be permanently reinvested. An estimate of the amounts considered permanently reinvested is $5.1 billion. It is not practical for the Company to compute the amount of additional U.S. tax that would be due on this amount. The Company has provided deferred income taxes on the earnings that the Company anticipates will be remitted.

The Company operates in jurisdictions, primarily Singapore and Malaysia, in which it has been granted tax holidays. The benefit of these holidays for 2014, 2013 and 2012 was approximately $11 million, $3 million and $2 million, respectively.

Note 14: Stockholders’ Equity

Common Stock

The Company’s Board of Directors has given management the authority to purchase approximately $3.8 billion of the Company’s common stock.  The Company, under this authorization, may purchase shares directly or indirectly by way of open market transactions or structured programs, including the use of derivatives, for the Company’s own account or through commercial banks or financial institutions.  At December 31, 2014, the Company had remaining authority for future stock purchases totaling approximately $476 million.
Changes in the number of shares of the Company’s outstanding stock for the last three years were as follows:

  
Common
Stock
  
Treasury
Stock
  
Shares
Outstanding
 
       
Balance - December 31, 2011  263,111,472   (17,579,397)  245,532,075 
             
Purchase of treasury stock     (412,800)  (412,800)
Stock issued under stock compensation plans     1,576,861   1,576,861 
             
Balance - December 31, 2012  263,111,472   (16,415,336)  246,696,136 
             
Purchase of treasury stock     (26,955,623)  (26,955,623)
Stock issued under stock compensation plans     1,687,795   1,687,795 
             
Balance - December 31, 2013  263,111,472   (41,683,164)  221,428,308 
             
Purchase of treasury stock     (27,970,492)  (27,970,492)
Stock issued under stock compensation plans     1,514,629   1,514,629 
             
Balance - December 31, 2014  263,111,472   (68,139,027)  (194,972,445)

At December 31, 2014, 17,447,056 shares of unissued common stock or treasury stock were reserved for future issuance relating to previous grants of options, deferred stock units, restricted stock units and other awards under various stock compensation plans that were still outstanding at December 31, 2014, and for future available grants under those plans.

Preferred Stock

The Company is authorized to issue up to 10 million shares of preferred stock, par value of $0.1 per share.  Shares of preferred stock may be issued in one or more series of classes, each of which series or class shall have such distinctive designation or title and terms as shall be fixed by the Board of Directors of the Company prior to issuance of any shares.

Retained Earnings

Delaware law, under which the Company is incorporated, provides that dividends may be declared by the Company’s Board of Directors from a current year’s earnings as well as from the total of capital in excess of par value plus the retained earnings, which amounted to approximately $8.9 billion at December 31, 2014.

In addition, dividends to be paid by OneSubsea to the venture partners require approval by the Board of Directors of OneSubsea.
Note 15: Accumulated Other Elements of Comprehensive Income (Loss)

Accumulated other elements of comprehensive income (loss) comprised the following:

(dollars in millions)
 
Accumulated Foreign Currency Translation
Gain (Loss)
  
Prior Service Credits and Net
Actuarial Losses
  
Accumulated Gain (Loss) on Cash
Flow Hedges
  Total  Other Comprehensive Income 
           
Balance at December 31, 2011 $(29) $(56) $(6) $(91)  
                   
Foreign currency translation gain (loss)  75         75  $75 
Actuarial gains (losses) recognized in other comprehensive income, net of tax     (33)     (33)  (33)
Amortization of actuarial (gains) losses, net of tax     2      2   2 
Gain (loss) on derivatives recognized in other comprehensive income, net of tax        10   10   10 
(Gain) loss on derivatives reclassified from accumulated other comprehensive income, net of tax          7   7   7 
Balance at December 31, 2012  46   (87)  11   (30) $61 
                     
Foreign currency translation gain (loss)  (95)        (95) $(95)
Actuarial gains (losses) recognized in other comprehensive income, net of tax     40      40   40 
Amortization of actuarial (gains) losses, net of tax     2      2   2 
Gain (loss) on derivatives recognized in other comprehensive income, net of tax        6   6   6 
(Gain) loss on derivatives reclassified from accumulated other comprehensive income, net of tax        (3)  (3)  (3)
Balance at December 31, 2013  (49)  (45)  14   (80) $(50)
                     
Foreign currency translation gain (loss)  (379)        (379) $(379)
Actuarial gains (losses) recognized in other comprehensive income, net of tax     (31)     (31)  (31)
Curtailment and settlement gains (losses)
recognized in other comprehensive income, net of tax
     (3)     (3)  (3)
Amortization of actuarial (gains) losses, net of tax     1      1   1 
Gain (loss) on derivatives recognized in other comprehensive income, net of tax        (52)  (52)  (52)
(Gain) loss on derivatives reclassified from accumulated other comprehensive income, net of tax        4   4   4 
                     
Balance of December 31, 2014 $(428) $(78) $(34) $(540) $(460)
Note 16: Business Segments

The Company’s segment reporting changed in 2014 resulting in the business being organized into four segments – Subsea, Surface, Drilling and Valves & Measurement (V&M).  Historical information by segment for 2012 and 2013 has been retrospectively revised to conform to the 2014 presentation.

The Subsea segment includes the operations of OneSubsea, a business jointly owned by Cameron (60%) and Schlumberger (40%).  The Subsea segment delivers integrated solutions, products, systems and services to the subsea oil and gas market, including integrated subsea production systems involving wellheads, subsea trees, manifolds and flowline connectors, subsea processing systems for the enhanced recovery of hydrocarbons, control systems, connectors and services designed to maximize reservoir recovery and extend the life of each field.

The Surface segment provides onshore and offshore platform wellhead systems and processing solutions, including valves, chokes, actuators, Christmas trees and aftermarket services to oil and gas operators.  Rental equipment and artificial lift technologies are also provided, as well as products and services involving shale gas production.

One of the major services provided by the Surface segment is CAMSHALE™ Production Solutions, which specializes in shale gas production.  In this process, intense pressure from fracing fluid (usually a mixture of water and sand) is used to crack surrounding shale.  Once the fractures are made, the water is removed from the well bore and the sand is left behind to hold the fractures open.  Oil and natural gas then moves out of the fractures, into the well bore, and up to the surface.

The Drilling segment provides drilling equipment and aftermarket services to shipyards, drilling contractors, exploration & production operators and rental tool companies.  Products fall into two broad categories: pressure control equipment and rotary drilling equipment and are designed for either onshore or offshore applications.  Such products include drilling equipment packages, blowout preventers (BOPs), BOP control systems, connectors, riser systems, valve and choke manifold systems, topdrives, mud pumps, pipe handling equipment, rig designs and rig kits.

The V&M segment businesses serve portions of the upstream, midstream and downstream markets.  These businesses provide valves and measurement systems that are primarily used to control, direct and measure the flow of oil and gas as they are moved from individual wellheads through flow lines, gathering lines and transmission systems to refineries, petrochemical plants and industrial centers for processing. Products include gate valves, butterfly valves, Orbit® brand rising stem ball valves, double block and bleed valves, plug valves, globe valves, check valves, actuators, chokes and aftermarket parts and services as well as measurement equipment products such as totalizers, turbine meters, flow computers, chart recorders, ultrasonic flow meters and sampling systems.

The Company’s primary customers are oil and gas majors, national oil companies, independent producers, engineering and construction companies, drilling contractors, rental companies, geothermal energy and independent power producers, pipeline operators, major chemical, petrochemical and refining companies, natural gas processing and transmission companies, compression leasing companies, durable goods manufacturers, utilities and air separation companies.

The Company markets its equipment through a worldwide network of sales and marketing employees supported by agents and distributors in selected international locations. Due to the extremely technical nature of many of the products, the marketing effort is further supported by a staff of engineering employees.

The Company expenses all research and product development and enhancement costs as incurred, or if incurred in connection with a product ordered by a customer, when the revenue associated with the product is recognized. For the years ended December 31, 2014, 2013 and 2012, research and product development expenditures, including amounts incurred on projects designed to enhance or add to its existing product offerings, totaled approximately $128 million, $83 million and $63 million, respectively. The Subsea segment accounted for 58%, 44% and 47% of each respective year’s total costs.
Summary financial data by segment follows:

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
Revenues:      
Subsea $3,067  $2,813  $2,061 
Surface  2,411   2,077   1,859 
Drilling  3,049   2,327   1,807 
V&M  2,125   2,105   2,168 
Elimination of intersegment revenues  (271)  (184)  (100)
Consolidated revenues $10,381  $9,138  $7,795 
             
Depreciation and amortization:            
Subsea $113  $85  $57 
Surface  126   106   85 
Drilling  60   60   46 
V&M  49   47   50 
Consolidated depreciation and amortization $348  $298  $238 
             
Segment operating income before interest and income taxes:            
Subsea $207  $152  $72 
Surface  427   367   315 
Drilling  474   311   329 
V&M  393   414   396 
Elimination of intersegment earnings  (74)  (35)  (21)
Segment operating income before interest and income taxes  1,427   1,209   1,091 
Corporate items:            
Corporate expenses  (145)  (162)  (126)
Interest, net  (129)  (100)  (90)
Other costs  (73)  (92)  (33)
Consolidated income from continuing operations before income taxes $1,080  $855  $842 
             
Capital expenditures:            
Subsea $70  $80  $82 
Surface  125   156   132 
Drilling  38   111   97 
V&M  49   58   30 
Corporate  96   102   69 
Discontinued operations  7   13   17 
Consolidated capital expenditures $385  $520  $427 
             
Total assets:            
Subsea $5,571  $5,897  $3,364 
Surface  2,756   2,705   2,307 
Drilling  3,011   3,076   2,413 
V&M  1,633   1,765   1,743 
Corporate  581   844   1,376 
Discontinued operations  217   616   615 
Elimination of intersegment investments  (877)  (654)  (660)
Consolidated total assets $12,892  $14,249  $11,158 
For internal management reporting, and therefore in the above segment information, “Corporate items” include governance expenses associated with the Company’s corporate office, as well as all of the Company’s interest income, interest expense, certain litigation expense managed by the Company’s General Counsel, foreign currency gains and losses from certain derivative and intercompany lending activities managed by the Company’s centralized Treasury function, all of the Company’s pension settlement costs, asset impairment and restructuring expenses, acquisition-related costs and various other unusual or one-time costs that are not considered a component of segment operating income. Consolidated interest income and expense are treated as a corporate item because cash equivalents, short-term investments and debt, including location, type, currency, etc., are managed on a worldwide basis by the Corporate Treasury Department.
Customer revenue by shipping location and long-lived assets by country were as follows:

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
Revenues:
      
United States $4,689  $4,311  $4,058 
United Kingdom  964   822   612 
Other foreign countries  4,728   4,005   3,125 
             
Total revenues $10,381  $9,138  $7,795 

  December 31, 
(dollars in millions)
 2014  2013  2012 
       
Long-lived assets:
      
United States $2,367  $2,670  $2,532 
United Kingdom  219   197   170 
Other foreign countries  2,567   2,999   1,323 
             
Total long-lived assets $5,153  $5,866  $4,025 

Note 17: Earnings Per Share

The calculation of basic and diluted earnings per share for each period presented was as follows:

  Year Ended December 31, 
(amounts in millions, except per share data)
 2014  2013  2012 
       
Net income attributable to Cameron $811  $699  $751 
             
Average shares outstanding (basic)  204   242   246 
Common stock equivalents  1   2   2 
             
Shares utilized in diluted earnings per share calculation  205   244   248 
             
Earnings per share attributable to Cameron stockholders:
            
Basic $3.98  $2.89  $3.05 
Diluted $3.96  $2.87  $3.03 

Note 18: Summary of Non-cash Operating, Investing and Financing Activities

The effect on net assets of non-cash operating, investing and financing activities was as follows:

(dollars in millions)
 2014  2013  2012 
       
Tax benefit of stock compensation plan transactions $6  $10  $12 
Change in fair value of derivatives accounted for as cash flow hedges, net of tax $(76) $14  $10 
Actuarial gain (loss), net, related to defined benefit pension and postretirement benefit plans $(35) $13  $(34)
Note 19: Off-Balance Sheet Risk and Guarantees, Concentrations of Credit Risk and Fair Value of Financial Instruments

Off-Balance Sheet Risk and Guarantees

At December 31, 2014, the Company was contingently liable with respect to approximately $1.1 billion of bank guarantees and standby letters of credit issued on its behalf by major domestic and international financial institutions in connection with the delivery, installation and performance of the Company’s products under contract with customers throughout the world. The Company was also liable to these financial institutions for financial letters of credit and other guarantees issued on its behalf totaling nearly $52 million, which provide security to third parties relating to the Company’s ability to meet specified financial obligations, including payment of leases, customs duties, insurance and other matters. Additionally, the Company was liable for approximately $28 million of insurance bonds at December 31, 2014 relating to the requirements in certain foreign jurisdictions where the Company does business that the Company hold insurance bonds rather than bank guarantees.

The Company’s other off-balance sheet risks were not material at December 31, 2014.

Concentrations of Credit Risk and Major Customers

Apart from its normal exposure to its customers, who are predominantly in the energy industry, the Company had no significant concentrations of credit risk at December 31, 2014. The Company typically does not require collateral for its customer trade receivables but does often obtain letters of credit from third-party banks as security for future payment on certain large product shipments.  Allowances for doubtful accounts are recorded for estimated losses that may result from the inability of customers to make required payments.  See Note 5 of the Notes to Consolidated Financial Statements for additional information.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, short-term investments, trade receivables, trade payables, derivative instruments and debt instruments. The book values of trade receivables, trade payables and floating-rate debt instruments are considered to be representative of their respective fair values.
Following is a summary of the Company’s financial instruments which have been valued at fair value in the Company’s Consolidated Balance Sheets at December 31, 2014 and 2013:

  
Fair Value Based on
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
  
Fair Value Based on
Significant Other
Observable Inputs
(Level 2)
  Total 
(dollars in millions)
 2014  2013  2014  2013  2014  2013 
             
Cash and cash equivalents:
            
Cash $616  $618  $  $  $616  $618 
Money market funds  842   1,172         842   1,172 
Commercial paper        13   4   13   4 
U.S. treasury securities  5            5    
U.S. corporate obligations  4            4    
Non-U.S. bank and other obligations  33   19         33   19 
Short-term investments:
                        
Commercial paper        11      11    
U.S. Treasury securities  51   41         51   41 
U.S. corporate obligations  51            51    
Non-qualified plan assets:
                        
Money market funds  1   1         1   1 
Domestic bond funds  3   3         3   3 
Domestic equity funds  5   5         5   5 
International equity funds  3   3         3   3 
Blended equity funds  5   4         5   4 
Common stock  2   2         2   2 
Derivatives, net asset (liability):
                        
Foreign currency contracts        (99)  19   (99)  19 
Total financial instruments $1,621  $1,868  $(75) $23  $1,546  $1,891 

Fair values for financial instruments utilizing level 2 inputs were determined from information obtained from third-party pricing sources, broker quotes, calculations involving the use of market indices or mutual fund unit values determined based upon the valuation of the funds’ underlying assets.

At December 31, 2014, the fair value of the Company’s fixed-rate debt (based on Level 1 quoted market rates) was approximately $2.9 billion as compared to the $2.7 billion face value of the debt recorded, net of original issue discounts, in the Company’s Consolidated Balance Sheet.  At December 31, 2013, the fair value of the Company’s fixed-rate debt (based on Level 1 quoted market rates) was approximately $2.7 billion as compared to the $2.5 billion face value of the debt.

Derivative Contracts

In order to mitigate the effect of exchange rate changes, the Company will often attempt to structure sales contracts to provide for collections from customers in the currency in which the Company incurs its manufacturing costs. In certain instances, the Company will enter into foreign currency forward contracts to hedge specific large anticipated receipts or disbursements in currencies for which the Company does not have fully offsetting local currency expenditures or receipts. The Company was party to a number of long-term foreign currency forward contracts at December 31, 2014. The purpose of the majority of these contracts was to hedge large anticipated non-functional currency cash flows on major subsea, drilling, valve or other equipment contracts. Many of these contracts have been designated as and are accounted for as cash flow hedges with changes in the fair value of those contracts recorded in accumulated other elements of comprehensive income (loss) in the period such change occurs.  Certain other contracts, many of which are centrally managed, are intended to offset other foreign currency exposures but have not been designated as hedges for accounting purposes and, therefore, any change in the fair value of those contracts are reflected in earnings in the period such change occurs.  The Company determines the fair value of its outstanding foreign currency forward contracts based on quoted exchange rates for the respective currencies applicable to similar instruments.
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Total gross volume bought (sold) by notional currency and maturity date on open foreign currency forward contracts at December 31, 2014 was as follows:
  Notional Amount - Buy  Notional Amount - Sell 
(in millions)
 2015  2016  2017  Total  2015  2016  Total 
               
Foreign exchange forward contracts -              
Notional currency in:
              
Euro  200   14      214   (10)  (1)  (11)
Malaysian ringgit  377   51      428   (29)     (29)
Norwegian krone  895   117   4   1,016   (96)  (44)  (140)
Pound Sterling  110   5      115   (22)  (1)  (23)
U.S. dollar  60         60   (635)  (47)  (682)
                             
Foreign exchange option contracts -                            
Notional currency in:
                            
U.S. dollar  87         87          
While the Company and its counterparties have the right to offset gains and losses on different derivative contracts under certain circumstances, the Company’s policy is to record its derivative contracts on a gross basis.  The fair values of derivative financial instruments recorded in the Company’s Consolidated Balance Sheets were as follows:

  December 31, 
  2014  2013 
(dollars in millions)
 Assets  Liabilities  Assets  Liabilities 
         
Derivatives designated as hedges:
        
Foreign exchange contracts
        
Current $8  $83  $28  $10 
Non-current  1   12   3   2 
Total derivatives designated as hedges  9   95   31   12 
                 
Derivatives not designated as hedges:
                
Foreign exchange contracts
                
Current  1   14   6   6 
Non-current            
Total derivatives not designated as hedges  1   14   6   6 
                 
Total derivatives $10  $109  $37  $18 

The after-tax loss on cash flow hedges included in accumulated other elements of comprehensive income and in noncontrolling interests totaled $47 million at December 31, 2014.  Approximately $38 million (after-tax) is expected to be recognized as a reduction in earnings in 2015.
80

The amount of pre-tax gain (loss) from the ineffective portion of derivatives designated as hedging instruments and from derivatives not designated as hedging instruments was:

  Year Ended December 31, 
(dollars in millions)
 2014  2013  2012 
       
Derivatives designated as hedging instruments:
      
Foreign currency contracts
      
Cost of sales $(7) $1  $ 
             
Derivatives not designated as hedging instruments:
            
Foreign currency contracts
            
Cost of sales  (11)  7   2 
Other costs  (8)  (1)  16 
             
Total pre-tax gain (loss) $(26) $7  $18 

Note 20: Contingencies

The Company is subject to a number of contingencies, including litigation, tax contingencies and environmental matters.

Litigation

The Company has been and continues to be named as a defendant in a number of multi-defendant, multi-plaintiff tort lawsuits. At December 31, 2014, the Company’s Consolidated Balance Sheet included a liability of approximately $17 million for such cases. The Company believes, based on its review of the facts and law, that the potential exposure from these suits will not have a material adverse effect on its consolidated results of operations, financial condition or liquidity.

Tax and Other Contingencies

The Company has legal entities in over 50 countries. As a result, the Company is subject to various tax filing requirements in these countries. The Company prepares its tax filings in a manner which it believes is consistent with such filing requirements. However, some of the tax laws and regulations to which the Company is subject require interpretation and/or judgment. Although the Company believes the tax liabilities for periods ending on or before the balance sheet date have been adequately provided for in the financial statements, to the extent a taxing authority believes the Company has not prepared its tax filings in accordance with the authority’s interpretation of the tax laws and regulations, the Company could be exposed to additional taxes.

The Company has been assessed customs duties and penalties by the government of Brazil totaling almost $50 million at December 31, 2014, including interest accrued at local country rates, following a customs audit for the years 2003-2010.  The Company filed an administrative appeal and believes a majority of this assessment will ultimately be proven to be incorrect because of numerous errors in the assessment, and because the government has not provided appropriate supporting documentation for the assessment.  As a result, the Company currently expects no material adverse impact on its results of operations or cash flows as a result of the ultimate resolution of this matter.  No amounts have been accrued for this assessment as of December 31, 2014 as no loss is currently considered probable.

Environmental Matters

The Company is currently identified as a potentially responsible party (PRP) for one site designated for cleanup under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) or similar state law. The Osborne site is a landfill into which a predecessor of the Reciprocating Compression operation in Grove City, Pennsylvania deposited waste, where remediation was completed in 2011 and remaining costs relate to ongoing ground water monitoring. The Company is also a party with de minimis exposure at other CERCLA sites.
81

The Company is engaged in site cleanup under the Voluntary Cleanup Plan of the Texas Commission on Environmental Quality ("TCEQ") at a former manufacturing location in Houston, Texas and had been engaged in one at a former manufacturing location in Missouri City, Texas.  With respect to the Missouri City site, the Company received a Certificate of Completion from the TCEQ on February 17, 2015.  With respect to the Houston site, in 2001, the Company discovered that contaminated underground water had migrated under an adjacent residential area. Pursuant to applicable state regulations, the Company notified the affected homeowners. Concerns over the impact on property values of the underground water contamination and its public disclosure led to a number of claims by homeowners.  The Company has settled these claims, primarily as a result of the settlement of a class action lawsuit, and is obligated to reimburse approximately 190 homeowners for any diminution in value of their property due to contamination concerns at the time of the property's sale. Test results of monitoring wells on the southeastern border of the plume indicate that the plume is moving in a new direction, likely as a result of a ground water drainage system completed as part of an interstate highway improvement project.  As a result, the Company notified 39 additional homeowners, and may provide notice to additional homeowners, whose property is adjacent to the class area that their property may be affected. The Company continues to monitor the situation to determine whether additional remedial measures would be appropriate.  The Company believes, based on its review of the facts and law, that any potential exposure from existing agreements as well as any possible new claims that may be filed with respect to this underground water contamination will not have a material adverse effect on its financial position or results of operations. The Company's Consolidated Balance Sheet included a noncurrent liability of approximately $7 million for these matters as of December 31, 2014.

Additionally, the Company has discontinued operations at a number of other sites which had been active for many years and which may have yet undiscovered contamination. The Company does not believe, based upon information currently available, that there are any material environmental liabilities existing at these locations. At December 31, 2014, the Company's Consolidated Balance Sheet included a noncurrent liability of nearly $3 million for these environmental matters.

Note 21: Recently Issued Accounting Pronouncements

In May 2014, the U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP and International Financial Reporting Standards (IFRS).

The core principle of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09), is that a company will recognize revenue when it transfers promised goods and services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services.  Companies will need to:

·identify performance obligations in each contract,
·estimate the amount of variable consideration to include in the transaction price, and
·allocate the transaction price to each separate performance obligation.

ASU 2014-09 will be effective for Cameron no earlier than the first quarter of 2017.  The Company is beginning the process of evaluating the impact of the new standard on its business and addressing whether it will select either the full retrospective or the modified retrospective implementation method upon adoption in 2017.
82

Note 22: Unaudited Quarterly Operating Results

Unaudited quarterly operating results were as follows:

  2014 (quarter ended) 
(dollars in millions, except per share data)
 March 31,  June 30,  September 30,  December 31, 
         
Revenues $2,329  $2,570  $2,678  $2,804 
Revenues less cost of sales (exclusive of depreciation and  amortization)
 $639  $720  $763  $795 
Other costs (credits) $49  $(6) $19  $11 
Net income $115  $233  $238  $262 
Net income attributable to noncontrolling interests $4  $12  $13  $8 
Net income attributable to Cameron stockholders $111  $221  $225  $254 
                 
Earnings per share attributable to Cameron stockholders:
                
Basic $0.51  $1.08  $1.12  $1.30 
Diluted $0.51  $1.08  $1.11  $1.28 

  2013 (quarter ended) 
(dollars in millions, except per share data)
 March 31,  June 30,  September 30,  December 31, 
         
Revenues $1,956  $2,134  $2,317  $2,731 
Revenues less cost of sales (exclusive of depreciation and  amortization)
 $574  $620  $668  $758 
Other costs (credits) $31  $36  $14  $11 
Net income $149  $140  $192  $243 
Net income attributable to noncontrolling interests $  $  $3  $22 
Net income attributable to Cameron stockholders $149  $140  $189  $221 
                 
Earnings per share attributable to Cameron stockholders:
                
Basic $0.60  $0.57  $0.78  $0.96 
Diluted $0.60  $0.57  $0.78  $0.94 
83

ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
(a)The Company carried out an evaluation, under the supervision and with the participation of the Company’s Sarbanes-Oxley Disclosure Committee and the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of December 31, 2014.   Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2014 to ensure that information required to be disclosed by the Company that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b)Management’s Report on Internal Control over Financial Reporting - The report of management of the Company regarding internal control over financial reporting is set forth in Part II, Item 8 of this Annual Report on Form 10-K under the caption “Management’s Report on Internal Control over Financial Reporting” and incorporated herein by reference.

(c)Attestation Report of Independent Registered Public Accounting Firm - The attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting is set forth in Part II, Item 8 of this Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm” and incorporated herein by reference.

(d)Changes in Internal Control over Financial Reporting – There were no changes made in the Company’s internal control over financial reporting during the fourth quarter of 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B.OTHER INFORMATION

None

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding Section 16(a) compliance, the Audit Committee, the Company’s Code of Business Ethics and Ethics for Directors, shareholder nominating procedures and background of the directors appearing under the captions “Section 16(a) Beneficial Ownership Reporting Compliance”, “Corporate Governance”, “Election of Directors”, and “Security Ownership of Management” in the Company’s Proxy Statement for the 2015 Annual Meeting of Stockholders is incorporated herein by reference.

The Registrant has adopted a Code of Conduct that applies to all employees, as well as a

Our Code of Ethics for Management Personnel, including Senior Financial Officers, is designed to promote honest and aethical conduct, proper disclosure of financial information, and compliance with applicable laws, rules and regulations by our officers and financial management. Our senior financial officers verify their commitment to and compliance with the Code on an annual basis.

Our Code of Ethics for Directors.  A copyConduct applies to all of each of these policies is available on the Registrant’s Internet website at www.c-a-m.comour employees and contractors and is availabledesigned to promote honest and ethical conduct and to articulate and provide guidance on our commitment to several key matters such as safety and health, protecting the environment, fair dealing, proper stewardship of our products, use of company resources, and accurate communication about our finances and products. It also addresses the many legal and ethical facets of integrity in printbusiness dealings with customers, suppliers, investors, the public, governments and the communities in which we live and where we do business. Our Code of Conduct has been translated into more than ten languages and is distributed to any shareholder freeour employees world-wide, who certify their commitment to and compliance with the Code on an annual basis.

ITEM 11.  EXECUTIVE COMPENSATION

Compensation Committee Report

We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, we recommended to the Board of charge upon request. The Registrant intends to satisfyDirectors that the disclosure requirements under Item 10 of Form 8-K regarding an amendment to, or a waiver from, a provision of its code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions, by posting such information on its website at the address set forth above.

84

The information under the heading “Executive Officers of the Registrant” in Part I, Item 1 of this Form 10-K is incorporated by reference in this section.
ITEM 11.EXECUTIVE COMPENSATION

The information concerning "Executive Compensation" required by Item 11 shallCompensation Discussion and Analysis be included in the Proxy StatementCompany’s Form 10-K/A.

Respectfully submitted,

Peter J. Fluor, Chairman

H. Paulett Eberhart

Rodolfo Landim

Michael E. Patrick

Bruce W. Wilkinson

Compensation Discussion and Analysis

This CD&A explains the Company’s executive compensation philosophy and practices and, in particular, those for our named executive officers or “NEOs.” Our NEOs are our former Chief Executive Officer, our current President and Chief Executive Officer, our Chief Financial Officer, and our three other most highly compensated executive officers in 2015. As used in this CD&A, the “Committee” refers to the Compensation Committee of the Board.

The following is a list of our NEOs by name and position for 2015:

Name

Position

R. Scott Rowe

President and Chief Executive Officer*

Jack B. Moore

Chairman of the Board**

Charles M. Sledge

Senior Vice President and Chief Financial Officer

William C. Lemmer

Senior Vice President and General Counsel

Steven P. Geiger

Vice President, Chief Administrative Officer

Hunter W. Jones

Vice President & President, Drilling Systems

*

Mr. Rowe was President and Chief Operating Officer until October 5, 2015 when he became President and Chief Executive Officer.

**

Mr. Moore retired from the Company and became non-executive Chairman on October 5, 2015. Prior to his retirement he was Chief Executive Officer as well as Chairman.

The CD&A is organized into five parts, as follows:

Part I

Executive Compensation Objectives and Design

Part II

Roles and Responsibilities

Part III

Executive Compensation Decision-Making Process

Part IV

Executive Compensation Elements and Mix

Part V

Other Matters Affecting Our Executive Compensation

Part I — Executive Compensation Objectives and Design

Purpose.  The purpose of our executive compensation program is to provide us with a means to:

· Attract, retain and motivate qualified executives to manage our business and affairs and lead us to our business goals and objectives;

· Provide performance-based incentives to encourage and reward achievement of our annual goals and long-term and strategic objectives; and

·Provide a competitive total compensation package that reflects our performance against goals and objectives, as well as the individual’s performance and contributions to our success.

Pay-for-Performance.  Our executive compensation program is designed to align our compensation incentives with the operating and performance goals and metrics chosen by our Board to drive long-term stockholder value creation. The design makes a significant portion of total direct compensation contingent upon performance against goals. Our NEOs’ targeted total direct compensation can be earned only if performance targets established by the Committee are met. The elements of our executive compensation that pay only against performance are the:

·Annual Incentives

·Performance Restricted Stock Unit Awards (“PRSUs”)

·Stock Options

We consider these elements of executive compensation to be filed relatingperformance-based compensation which is “at risk” because our annual incentives and performance-based equity awards can be earned only if pre-determined levels of performance are achieved against approved goals, and our stock options provide value only if and to the extent there is an increase in the value of our Common Stock during the option term. Although our RSUs have a performance hurdle, we do not classify them as performance compensation for the purpose of a pay-for-performance discussion.

Targeted to Median.  Our program targets the level of cash compensation (made up of base salaries and annual incentives) and long-term equity incentive grant value at the median of what the Committee and its independent compensation consultant consider to be “competitive market levels.” The Committee considers the median of these “competitive market levels” to be the appropriate guidepost for achieving our compensation objectives.

A median “competitive market level” is developed annually for each executive officer by the Committee’s independent compensation consultant. It is developed by comparing each executive officer’s compensation to that of officers in similar positions with (1) our peer companies and (2) companies in the manufacturing industry in general. Peer group data is taken from SEC filings and industry data is taken from Mercer and Aon Hewitt Associates. When reviewing compensation levels against the survey data, the Committee considers only the aggregated survey data provided by the surveys. The identity of the individual companies comprising the survey data is not disclosed to, or

considered by, the Committee in its evaluation process and, the Committee does not consider the identity of the companies comprising the survey data to be material for this purpose.

For the CEO and Chief Financial Officer positions peer company data is given a 75% weighting and industry data a 25% weighting; for the General Counsel position, peer company data is given a 25% weighting and industry data 75%; and, for the other NEO positions, industry data is given a 100% weighting. The weightings are employed to reflect the comparability of the position matches at each level, as the more a comparable position appears in peer SEC filings, the greater the weight given peer data.

The industry data is typically lower than peer group data, resulting in our “median competitive market levels” being lower than if derived solely from peer data alone.

Peer Groups.  The Committee selected two different peer groups for two different purposes, a compensation peer group for the purpose of benchmarking and making executive compensation comparisons and a performance peer group used for measuring our relative TSR performance for PRSU award purposes.

Our compensation peer group is composed of publicly traded oilfield services and equipment manufacturing companies selected by the Committee because they are generally of similar size and complexity, and are those companies with whom we compete in the labor market to attract and retain qualified executives. They include, but are not limited to, the same companies which we use for performance comparisons in our Annual Report on Form 10-K.

The compensation peer group used for decisions affecting 2015 compensation is composed of the following 15 companies, as selected and approved by the Committee taking into account the recommendations made by the Committee’s independent compensation consultant, an annual peer-of-peers review, and the peer groups used by certain proxy advisors:

Compensation Peer Group

Baker Hughes Incorporated
Dover Corporation
Ensco plc
Flowserve Corporation
FMC Technologies, Inc.
Halliburton Company
McDermott International, Inc.
Nabors Industries, Inc.

National Oilwell Varco, Inc.
Noble Corporation
Oil States International, Inc.
Parker-Hannifin Corporation
Schlumberger Limited
Transocean Ltd.
Weatherford International plc

Eight of the 15 companies in our compensation peer group are included, along with us, in the PHLX Oil Service Sector (Ticker Symbol: OSX). The companies in our compensation peer group not included in the OSX are Dover Corporation, Ensco plc, Flowserve Corporation, FMC Technologies Inc., McDermott International, Inc., Noble Corporation and Parker-Hannifin Corporation. These companies were included because they are manufacturing companies serving the same or similar markets as Cameron. Of the six OSX companies not included in our compensation peer groups, two, Core Laboratories NV and Oceaneering International, Inc., were not included because they are in such sufficiently different businesses from us that the Committee does not consider them peers, and the other four, Diamond Offshore Drilling, Inc., Helmerick & Payne, Inc., Rowan Companies plc and Tidewater, Inc., were not included even though they share some business characteristics with Cameron, because they are drilling companies. The Committee concluded that including them would cause drilling companies to be over weighted in the overall group at the expense of manufacturing companies.

Our performance peer group is the OSX. This index was selected by the Committee because it is a published industry index composed of companies with whom we compete in the capital market. It is also the peer group used for our stock performance graph in our Annual Report on Form 10-K. The TSR goal and the selection of the OSX companies to serve as the bench-mark group for relative TSR

performance of our Company is discussed in Part IV of this CD&A under the caption “Long-Term Incentives — Performance Awards”.

Part II — Roles and Responsibilities

Role of the Compensation Committee.  The Committee makes all compensation decisions regarding our executive officers, including our NEOs. The Committee confers with the other independent directors in Executive Session of the Board before making its decisions regarding the compensation of our CEO.

The following are the principal functions of the Committee with respect to executive compensation:

·Establishes compensation policies and reviews them to determine whether they (1) adequately support business goals and objectives or (2) encourage inappropriate behavior from a risk perspective that could have a material adverse effect on us;

·Approves peer group selection criteria and selects the companies included in our peer groups;

·Sets the CEO’s compensation, giving consideration to the performance evaluation of the CEO conducted by the Nominating and Governance Committee, competitive data and the recommendation of the Committee’s independent compensation consultant;

·Sets the other executive officers’ compensation, after giving consideration to performance evaluations provided by the CEO, competitive data and the recommendation of the Committee’s independent compensation consultant;

·Oversees administration of our annual incentive program and (1) establishes eligible classes of participants, (2) sets performance goals, (3) approves minimum, target and maximum awards and (4) certifies attainment of goals and approves any payouts;

·Oversees administration of our long-term incentive plan, including (1) determining the total number of shares available for grant, (2) establishing the award guidelines to be used when determining the amount and mix of individual awards, (3) making grants to executive officers and key employees and (4) authorizing the number of shares available for grant to other employees;

·Exercises oversight responsibility for our severance policies and any individual employment and severance arrangements;

·Reviews compliance with our stock ownership guidelines; and

·Reviews and approves our executive benefits and perquisites.

Role of Independent Compensation Consultant.  The Committee is assisted by an independent compensation consultant retained by the Committee on an annual basis. Frederick W. Cook & Co. Inc. (“FWC”) is currently serving in that role. The independent compensation consultant reports to and acts at the direction of the Committee. FWC provides no services for management or the Committee that are unrelated to the duties and responsibilities of the Committee.

At the Committee’s request, FWC annually prepares a Report on Executive Compensation for the Committee. The Report focuses on our executive compensation program’s effectiveness in supporting our business strategy, its reasonableness and competitiveness as compared to the compensation practices of our peer group and other manufacturing companies, and our relative performance versus our peers. It covers each element of total compensation of executive officers, and compares them to data gathered from proxy statements and SEC filings of our peer group companies and from publicly available compensation surveys of the manufacturing industry conducted by Mercer and Aon Hewitt Associates. It calculates competitive market levels of compensation for each executive officer. It analyzes the cost and potential dilution to our stockholders of equity incentives and compares them to

those of our peer group, and reports on the equity ownership of each of our executive officers, including both shares owned directly and owned indirectly through outstanding equity grants.

Independence of Compensation Consultant.  The Committee has the sole authority to retain or terminate its compensation consultant and other advisors. The compensation consultant’s role with us is limited to executive compensation matters and no such services are performed unless at the direction of and/or with the approval of the Committee. In connection with its engagement of FWC, the Committee considered various factors bearing on FWC’s independence, including the amount of fees paid by us to FWC and the percentage of FWC’s total revenues they represented; FWC’s policies and procedures for preventing conflicts of interest and compliance with those procedures; any personal and business relationship of any FWC personnel with any of the Committee members or our executive officers; and FWC’s policies prohibiting stock ownership by FWC personnel engaged in any Cameron matter and compliance with those policies. After reviewing these factors, the Committee determined that FWC is independent and that its engagement did not present any conflict of interest.

Role of CEO.  Our CEO periodically reviews the performance of other executive officers, including the other NEOs, with the Committee for the Committee’s use when making decisions regarding compensation and other matters, including succession planning. He submits proposals on performance objectives for annual incentive compensation and for long-term incentive grant values. He offers recommendations to the Committee on executive compensation program design and on compensation components for individual executive officers. Our CEO also regularly attends Committee meetings and provides his perspectives, judgment and recommendations on matters being considered by the Committee. He does not offer recommendation on his own compensation, nor does he attend meetings where his compensation is being discussed.

Part III — Executive Compensation Decision-Making Process

Advisory Votes on Executive Compensation.  Say-on-Pay Vote.  Our stockholders expressed a preference for a yearly advisory Say-on-Pay vote on executive compensation. Accordingly a Say-on-Pay vote has been offered to our stockholders each year since. When considering the executive compensation program and executive compensation decisions, the Committee takes into account the most recent stockholder Say-on-Pay vote and the comments and policies of stockholders and proxy advisory firms expressed in conjunction with that vote or otherwise. The 2015 Say-on-Pay vote conducted in conjunction with our 2015 Annual Meeting of Stockholders passed with 96.46% of the votes cast in favor.

Golden Parachute Vote.  In addition, an advisory Golden Parachute vote on executive compensation was conducted on December 17, 2015, in conjunction with the stockholder vote approving the Agreement and Plan of Merger between Cameron and Schlumberger Holdings Corporation, et al., dated August 25, 2015 (the “Agreement and Plan of Merger”). This vote passed with 53% of the votes cast in favor.

Tally Sheets.  In addition to a review of the Report on Executive Compensation prepared by the Committee’s independent compensation consultant, each year the Committee reviews a “tally sheet”, which itemizes the total compensation of each of our executive officers, including the NEOs, for the prior two years and the estimated minimum, target and maximum total compensation that could be earned by each during the year the tally sheet is incorporated hereinprepared depending on whether, and to what extent, performance-based compensation is earned. The Committee considers the appropriateness and the amounts of each element, the mix of the elements and the overall amount of total compensation when making its decisions on both the compensation program as a whole and the compensation to be paid each executive for the coming year.

Risk Mitigation.  Our compensation philosophy is to emphasize pay-for-performance and to place a significant amount of total compensation at risk for the reasons discussed above. To mitigate against any risk that performance pay might cause, the Committee and the Board have adopted stock ownership requirements and a clawback policy, and the Committee has placed time-vesting requirements on earned PRSUs in order to drive a balanced focus between short-term and long-term focus. The independent compensation consultant and the Committee perform an annual assessment of

our compensation policies and practices, including all incentive programs, to determine whether the risks arising from those policies and practices could be considered reasonably likely to have a material adverse effect on our company. Based on their review, the independent compensation consultant and the Committee again concluded at the Committee’s February, 2016 meeting that our compensation policies and practices do not create risks that are reasonably likely to have such an effect.

Other Considerations. When making compensation decisions with respect to each of our executive officers, including our NEOs, in addition to the items discussed above, the Committee also considers:

·Level of responsibilities and impact of the executive on our results;

·Skill and experience needed to fulfill his or her responsibilities;

·Effectiveness in discharging his or her responsibilities;

·Level of his or her achievement of goals and objectives;

·Performance of Cameron in relation to its peer group;

·Compensation levels and practices of companies with whom we compete for talent;

·Total compensation of each executive position as compared with the compensation for like positions within our peer group and, in order to gain a broader perspective of the range of competitive reasonableness, within the larger category of the manufacturing industry in general;

·Analyses prepared by reference.


ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

and recommendations of the Committee’s independent compensation consultant regarding the appropriate amount and mix of compensation for each executive;

·Recommendations of our CEO (except for his own position); and

·Internal equity based on the impact of relative duties, responsibilities, position and performance within our company.

Part IV — Executive Compensation Elements and Mix

Base Salary.  Each of our executives earns a base salary for services rendered during the year. Base salaries are paid to provide executive officers with a market-competitive minimum level of annual earnings. Base salary ranges are determined for each executive position based on job responsibilities, required experience, general market competitiveness and internal comparisons. Base salaries, along with all other elements of compensation, are reviewed annually by the Committee at its fall meeting, giving consideration to:

·total compensation as itemized in the tally sheets;

·changes in levels of responsibility;

·performance of the executive and his or her contributions to our overall performance;

·annual competitive review of executive compensation prepared by the Committee’s independent compensation consultant; and

·internal review of the executive’s compensation relative to base salaries of other executive officers.

Based on its evaluation of these factors, during its annual review of executive salaries at its October 2014 meeting, the Committee made no adjustments to 2015 base salaries. The information concerning "Security OwnershipCommittee did make

an in-year adjustment, which is shown in the table below, to Mr. Rowe’s Base Salary to reflect the fact he was selected to become the Company’s CEO, effective October 5, 2015.

 

 

 

2015 Base Salaries

Name

 

2014 ($)

 

2015 ($)

 

% Change

 

R. Scott Rowe

 

606,900

 

606,900

 

0.0

 

 

 

 

 

1,000,000

*

64.8

 

Jack B. Moore

 

1,125,000

 

1,125,000

 

0.0

 

Charles M. Sledge

 

652,100

 

652,100

 

0.0

 

William C. Lemmer

 

556,200

 

556,200

 

0.0

 

Steven P. Geiger

 

450,000

 

450,000

 

0.0

 

Hunter W. Jones

 

380,000

 

410,000

 

7.9

 

* Effective as of Certain Beneficial Owners"October 5, 2015, when Mr. Rowe became the Company’s CEO.

As a result of the Committee’s evaluation of the factors discussed above at its October 2015 meeting, and "Security Ownershipthe uncertainties in the macro-environment affecting us and our peers, competitors and customers, the Committee made no adjustments to base salaries for 2016.

 

 

 

2016 Base Salaries

Name

 

2015 ($)

 

2016 ($)

 

% Change

 

R. Scott Rowe

 

1,000,000

*

1,000,000

 

0.0

 

Jack B. Moore

��

1,125,000

 

0

 

N/A

 

Charles M. Sledge

 

652,100

 

652,100

 

0.0

 

William C. Lemmer

 

556,200

 

556,200

 

0.0

 

Steven P. Geiger

 

450,000

 

450,000

 

0.0

 

Hunter W. Jones

 

410,000

 

410,000

 

0.0

 

* Effective as of Management" requiredOctober 5, 2015, when Mr. Rowe became the Company’s CEO.

Annual Incentive Compensation.  Our Management Incentive Compensation Plan (“MICP”) provides each of our executive officers and other key management employees an annual opportunity to earn incentive compensation based on performance against pre-established objectives. These objectives are set by Item 12 shall be includedthe Committee and are based on our Board-approved operating plan and budget. Annual incentive compensation is offered to incentivize performance supporting our company-wide objectives, business unit objectives, and individual objectives as well as to reflect competitive practice.

Target Award Opportunities.  The Committee, taking into consideration peer group and industry competitive practices, the advice and recommendations of the Committee’s independent compensation consultant, and the recommendations of the CEO for positions other than his own, establishes a target-award opportunity for each executive expressed as a percentage of base salary. Our target values are set at or near the market-median target percentages.

Target awards for our NEOs for 2015 and 2016 are set out below.

MICP Target-Award Opportunities

(% of base salary)

Name

 

2015

 

2016

R. Scott Rowe

 

90%

 

 

 

 

120%

*

120%

Jack B. Moore

 

125%

 

N/A

Charles M. Sledge

 

80%

 

80%

William C. Lemmer

 

70%

 

70%

Steven P. Geiger

 

65%

 

65%

Hunter W. Jones

 

65%

 

65%

* Effective as of October 5, 2015, when Mr. Rowe became the Company’s CEO.

Performance Objectives.  Performance objectives are set by the Committee for each year based on proposals submitted to the Committee by the CEO. The CEO’s proposals, and ultimately the performance objectives selected, are based on and designed to encourage achievement of our annual performance goals set out in our Proxy StatementBoard-approved annual operating plan and budget, as well as business strategies for that year. The Committee also considers overall market conditions, the industry environment and our position in each of our business lines when setting performance objectives.

For 2015, the Committee selected earnings per share (“EPS”) and cash flow from operations as the financial performance objectives for all corporate executives, including the CEO as the Committee considered these objectives to be filed relatingthe principal indicators of financial performance and drivers of stockholder value. For executives with operating unit responsibilities the Committee chose EPS, operating unit consolidated earnings before income taxes (“EBIT”) and unit cash flow.

The Committee also maintained a total TRIR goal for 2015 as the Committee is of the view that our employees are critical to our success and their health and safety need to be a foremost focus of management. For executives with corporate responsibilities, the target objective is a company-wide TRIR goal. For executives with operating unit responsibilities, the TRIR objective is operating unit specific and an improvement over that unit’s individual history. The Committee also maintained an on-time-delivery measure as a performance goal for executives with operating unit responsibilities as this objective is considered to be a key component of customer satisfaction and engagement. The Committee also added a selling, general and administrative (“SG&A”) cost reduction goal for corporate executives in order to lower the Company’s cost structure and enhance profitability.

As in prior years, the Committee set a return on equity (“ROE”) hurdle of 7%. If the hurdle had not been met or exceeded, any bonus payment otherwise earned would have been reduced by 50% for all participants.

In order to allow the Committee the opportunity to exercise the maximum possible discretion when determining award payouts to NEOs while maintaining deductibility under Section 162(m) of the Internal Revenue Code, the Committee establishes an annual baseline performance hurdle for the full funding of the annual incentive compensation for NEOs. For 2015 the baseline performance hurdle was the achievement of positive earnings. If the performance hurdle was met, the incentive compensation pool is funded at the maximum opportunity for each NEO. If the hurdle is not met, the NEOs would not earn any annual incentive compensation. Should the performance hurdle be met and the compensation pool fully funded, the Committee applies negative discretion to determine the actual awards to be made to each NEO, taking into consideration such matters as our actual performance against the MICP performance objectives for 2015, the individual NEO’s performance and contributions, and other factors in the Committee’s discretion.

Weighting of Performance Objectives.  The Committee decides what the percent of the target award or weighting will be for each of the Performance Objectives and selected the following for 2015.

2015 Weighting of Performance Objectives Corporate Executives

CAMERON

EPS

 

Cash Flow

 

On-Time Delivery

 

TRIR

 

SG&A Cost Reduction

50%

 

20%

 

10%

 

10%

 

10%

Weighting of Performance Objectives Business Unit Executives

CAMERON

 

BUSINESS UNIT

 

 

EPS

 

EBIT

 

Cash
Flow

 

On-Time
Delivery

 

TRIR

25%

 

25%

 

20%

 

20%

 

10%

Performance and Payout.  The Committee establishes the percent of a target award that can be earned at different performance levels. Minimum, target and maximum payout levels are set out below.

For 2015, because of the challenges posed by the uncertain macro-environment at the time during which goals for the year must be set, the Committee took the following actions:

·Changed the performance curves by widening the performance range and lowering the threshold payments.

·Created a range of +/-2.5% around the goal target for which performance within this range resulted in a target payout for those financial objectives.

In addition, in order to prevent the potential for a windfall payout in the event of an unexpected turnaround in the oil and gas business in 2015, the Committee added a provision that would require Cameron to perform in the top quartile of our performance peer group in order to receive a payout in excess of 150% of target EPS performance.  In 2015, Cameron’s TSR was the top performer.

 

Performance & Payout

 

2015

 

Objectives

Performance

Percentage of
Target Payout

Financial

Less than 75%

0%

(EPS*/EBIT/Cash Flow)

75%

37.5%

 

97.5-102.5%

100%

 

125%

200%*

On-Time Delivery

Less than 75% OTD

0%

 

 75%

50%

 

 85%

100%

 

 95%

200%

Safety

More than 0.68 TRIR

0%

 

0.68

50%

 

0.57

100%

 

0.46

200%

*To achieve a greater than a 150% payout for EPS, our TSR performance for 2015 had to have been in the top quantile of our performance peer group.

The maximum amount that can be earned under the MICP for any year is capped at 200% of target bonus even when performance exceeds the maximum. Under the MICP, no additional sum can be earned or “banked” for subsequent years.

Certifying Performance.  During the first quarter, following year-end and the completion of our financial statement audit, our Company’s and each unit’s actual performance against the established goals is computed. The 2015 results for EPS, adjusted for non-operational items, cash flow from operations, safety and on-time delivery are set out in the table below.

 

2015 Performance Attained

 

Target

Actual

Performance
Achieved

Payout
Attainment

Weight

Payout
Result

CAM EPS ($/sh)

$3.17-$3.33

$3.90

120.00%

177.82%

50%

88.91%

CAM CASH FLOW ($M)

$614.3-$645.8

$780.4

123.90%

194.98%

20%

39.00%

CAM OTD (%)

85.00%

82.80%

N/A

  89.00%

10%

   8.90%

CAM TRIR

0.57

0.46

N/A

200.00%

10%

20.00%

ENTERPRISE WIDE COST

REDUCTION ($M)

$112.8

$184.1

163.21%

200.00%

10.0

20.00%

 

 

 

 

 

 

 

Total Performance

 

 

 

 

 

    176.81%

Approving Payouts.  When determining and approving payouts for 2015 MICP performance, the Committee approved payouts derived from the performance against goals. The Committee did, however, exercise negative discretion of 15% to the 2015 Annual Meetingamount earned for TRIR performance by Corporate NEOs and the executive team of Stockholders and is incorporated herein by reference.


ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information concerning the Company's "Policy on Related Person Transactions" and "Director Independence" required by Item 13 shall be included in our Proxy Statement to be filed relating to the 2015 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES

The information concerning "Principal Accounting Firm Fees" required by Item 14 shall be included in the Proxy Statement to be filed relating to our 2015 Annual Meeting of Stockholders and is incorporated herein by reference.

PART IV

ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)The following documents are filed as part of this Report:

(1)Financial statements:

All financial statementsone of the Registrant as set forth under Part II, Item 8operating units which experienced a traffic fatality of this Annual Report on Form 10-K.one of its employees during 2015.

2015 MICP Payouts

 

Earned $

Payout $

R. Scott Rowe

1,283,798

1,262,015

Jack B. Moore

1,912,608

1,880,156

Charles M. Sledge

922,382

906,732

William C. Lemmer

688,392

676,712

Steven P. Geiger

517,169

508,394

Hunter W. Jones

409,144

409,144

Long-Term Incentives.  The purpose of our long-term equity awards is to support the achievement of our long-term goals. They are also intended to align compensation of executives and other key

19




(2)Financial statement schedules:
85

Table of Contents

management employees with the interests of our long-term stockholders by providing incentives tied to our long-term success and increases in share price and stockholder value.

Our long-term incentive program is administered under our Equity Incentive Plan, which was approved by our stockholders in 2013. The Committee, after discussions with our independent compensation consultant, determines the aggregate target value for the long-term incentives to be granted to the executive officers as a group and individually. The Committee makes its determinations giving consideration to:

·the grant practices of our compensation peer group companies, which are reflected in the independent compensation consultant’s annual Report on Executive Compensation;

·industry grant practices in general;

·the share value to be transferred in comparison to amounts granted by compensation peer group companies and amounts reported in industry surveys; and

·the “burn rate” or percentage of outstanding shares that would be used.

The tables below sets out target long-term incentive grant value established for each of our NEOs for 2015 and 2016.

Target Long-Term Incentive Grant Value

Name

2015 Value($)

2016 Value($)

R. Scott Rowe

3,536,717

6,800,000

Jack B. Moore

7,100,000

0

Charles M. Sledge

2,250,000

2,250,000

William C. Lemmer

1,765,000

1,765,000

Steven P. Geiger

1,200,000

1,200,000

Hunter W. Jones

900,000

900,000

Mr. Rowe’s initial 2015 long-term incentive grant value was $2,500,000. On October 5, 2015, the increased in this value by $1,036,717 in recognition of his appointment as CEO. These additional grants raised Mr. Rowe’s 2015 long-term incentive grant value to 3,536,717.

Long-Term Incentive Vehicle Mix.  For 2015, the Committee chose the following long-term incentive grant mix:

Stock Options – 40%

Performance Restricted Stock – 40%

Restricted Stock – 20%

The Committee determined this to be the appropriate mix as it focused equally on three-year objectives and on long-term growth in share value, while placing a lesser, though still significant, emphasis on retention and continuity. Individuals may be granted more or less than the target amounts for their positions, based on individual performance, past grant history, employment retention considerations, internal equity, and the Committee’s evaluation of future chances for promotion.

PRSUs have a three-year vesting period and stock options and RSUs vest over a three-year period with one-third of the award vesting per year beginning on the first anniversary of the grant date.

For 2016, the mix was provided for in the Agreement and Plan of Merger, and is:

Stock Options – 30%

Restricted Stock – 70%

The Committee has historically approved annual long-term incentive awards at its fall meeting, which is scheduled at least one year in advance. The Committee prefers this “mechanical” approach to selecting

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the grant date, rather than a “discretionary” approach, as it avoids having to make arbitrary judgments regarding timing of awards. To the extent newly hired or promoted executives receive an initial award of stock options, the options are priced at the closing price on a date no earlier than their actual start or approval date.

Performance Awards.The BoardCommittee awarded PRSUs to drive performance against Committee established goals over a three-year period. They are intended to not only encourage and reward performance against these goals but also to assist in retention of Directorskey employees, as any PRSUs earned by performance cliff vest three years from the date of grant. Generally, both the performance and Stockholderscontinued employment requirements must be satisfied in order for the executive to earn a payout under the award. The performance goals are established by the Committee no later than its first meeting of

Cameron International Corporation

We have audited the consolidated financial statementsinitial year of Cameron International Corporation (the Company)the performance period.

For 2015, 40% of each officer’s target long-term incentive grant value was made up of PRSUs. The target number of PRSUs subject to any individual award was determined by dividing 40% of the long-term grant value targeted for that individual by the “grant date fair value” of the awards. See Footnote No. 3 to the Summary Compensation Table for the calculation of the grant date fair value.

For 2015, the Committee chose two performance goals for PRSUs: 50% of each grant was given an ROIC goal, and 50% a TSR goal.

·ROIC PRSUs.  The Committee chose ROIC as of December 31, 2014 and 2013, anda goal because it is a generally accepted benchmark to measure the return a company generates on the capital invested in its business. Performance against the ROIC target goal is determined by averaging our performance against the ROIC goal set by the Committee for each of the three years of their respective performance periods. The ROIC target for 2015 was set at 11.4-12.0%. The Committee determined performance against the 2015 goal to be 14.2%, or 184.6% of target. This performance level was and will be used as one of the three-year annual performance calculations to determine the actual number of shares earned under the PRSU awards for which 2015 was a performance period.

·TSR PRSUs.  The Committee chose TSR as a goal in order to directly align the interests of our executives with those of our stockholders. Performance against the TSR goal is determined by comparing the performance of our TSR with that of the OSX over the three-year performance period of the PRSUs. The Committee determined that the OSX is an appropriate benchmark against which to compare our TSR performance for the reasons discussed above in “Peer Groups.”

The number and value of PRSUs for 2015 that could actually be earned was determined by performance against the goals established by the Committee and can range from 0 to 200% of the target value, depending upon performance.

The following table summarizes how performance against the ROIC goal is measured, and with the exception noted below the table, how the TSR goal is measured.

 

Performance & Payout

 

2015

Objective

Performance

Against Goal

Percentage of

Target Payout

ROIC

Less than 75%

0

 

75%

     37.5

 

97.5% - 102.5%

100

 

125%

  200*

TSR

Less than 25th Percentile

0

 

25th to 50th Percentile

50-99*

 

50th to 80th Percentile

100-199

 

80th Percentile or greater

200

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In the event of a negative TSR, any payout would have been capped at Target irrespective of our ranking relative to the OSX companies’ performance.

For the PRSUs granted in 2013 with a three-year performance period of 2013 through 2015, 50% of which had an ROIC goal and 50% of which had a TSR goal, the performance level attained was determined as follows:

2013-2015 PRSU Payout

 

Objectives

Percent of
Award
Earned

Weight

Payout

ROIC

126%

50%

63.0%

TSR

200%

50%

100.0%

 

 

 

 

Total Payout

 

 

163.0%

Stock Options.  The Committee awards stock options to make a portion of executive officers’ total direct compensation contingent on long-term stock price appreciation. In October 2014, each executive officer, including the NEOs (other than Mr. Moore), received an award of stock options for 2015, and in October 2015 (other than Mr. Moore) for 2016. The number of options for each individual award made in 2014 for 2015 was determined by taking 40% of the long-term incentive grant value targeted for that individual and dividing it by the grant date fair value of a stock option. The number of options for each individual award made in 2015 for 2016 was determined by taking 30% of the long-term incentive grant value targeted for each individual for 2015 and dividing it by the grant date fair value of a stock option. See Footnote No. 3 to the Summary Compensation Table for the calculation of the “grant date fair value.”

The exercise price for all our stock option awards, including those for 2015 and for 2016, is equal to the closing share price on the date of grant. Stock options vest over a three-year period, with one-third of the options vesting per year, beginning on the first anniversary of the grant date. Stock options have a ten-year term.

Restricted Stock Units.  The Committee awards RSUs to encourage and promote retention. The number of RSUs for any individual award made in 2014 for 2015 and in 2015 for 2016 was determined by taking 20% or 70%, respectively, of the 2015 long-term incentive grant value targeted for that individual and dividing it by the closing price of our Common Stock on the date of grant.

RSU awards generally vest over a three-year period, with one-third vesting per year beginning on the first anniversary of the grant date.

To ensure that certain deduction limits under Section 162(m) of the Internal Revenue Code not apply to RSU awards (see “Tax Implications of Executive Compensation” on page 50), RSU awards for our executive officers, including our NEOs, require that we generate $50 million of net income in the year following the year in which the grant is made (e.g., awards made in October 2014 for 2015 require more than $50 million of net income in 2015) as a condition to the RSUs being earned and eligible for vesting.

Benefits, Retirement Programs and Perquisites.  We provide our executive officers with benefits and perquisites that the Committee has concluded are reasonable to assist in attracting and retaining qualified executives. These benefits are generally the same as those broadly available to all our U.S. salaried employees, except for a nonqualified deferred compensation plan made available to our more highly compensated employees, including NEOs and other executives. This plan is intended to restore benefits of income deferral that would otherwise be lost due to federal tax limitations using the same funding formula used for other eligible employees. Perquisites include only financial planning services and the opportunity for senior vice presidents and higher ranked officers to use company-leased aircraft for personal travel provided they reimburse us for the incremental operating costs. Each year, the Committee reviews the appropriateness of both the nature and type of benefits and perquisites, and the associated values and costs.

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Benefits and Retirement Programs.  We provide our executive officers, including our CEO and the other NEOs, the same health and welfare benefits that are broadly available to our U.S. non-union employees, with no additional related benefits, programs or special features.

In addition to our Retirement Savings Plan, which is a qualified deferred compensation plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (“Code”), and in which all U.S. employees, including executive officers, who meet the age, service and other requirements of the plan are eligible to participate, we offer a deferred compensation plan to more highly compensated employees, including executives. We do not provide defined benefit plans to executive officers. Our Deferred Compensation Plan is a nonqualified defined contribution plan. It is designed to allow deferral of income from base salary and annual bonus and company contributions that could have been made under our Retirement Savings Plan but for IRS limitations on deferrals of compensation into a tax-qualified plan. There is no “above-market” interest or preferential earnings element credited on any deferred compensation as defined in applicable SEC rules relating to disclosures on proxy statements.

Perquisites.  Our executive officers, including the NEOs, are eligible to receive financial planning services. The Committee believes it is in the interest of our Company to assist executives in the handling of their personal finances, particularly tax filing obligations, to prevent them from being a distraction to the executive or an embarrassment to us. The cost of such services is imputed to the executive as income.

Our executive officers are reimbursed for the cost of spousal travel if there is a business purpose for the spouse to accompany the executive to a function or event. The cost of any such travel is imputed to the executive as income. The CEO and COO and Senior Vice Presidents are also eligible to use company-leased aircraft for personal travel, provided they reimburse us for the incremental operating cost of any such use.

We do not provide any tax gross-ups for any reported income related to such perquisites.

The cost to us of all benefits and perquisites provided to our executive officers is included in the Committee’s independent compensation consultant’s competitive analysis and in the annual tally sheet presentation to the Committee on total compensation paid to executives.

Part V — Other Matters Affecting Our Executive Compensation

Clawback of Incentive Compensation.  We have an executive compensation clawback policy. Under that policy, which has been incorporated into awards under our annual and long-term incentive plans, should any executive officer commit fraud or intentional wrongdoing which results in a required financial restatement, we have the right to recover incentive and performance compensation paid or awarded to such executive officer within the past five years for the year restated and for the two years prior to any year of restatement.

Prohibition of Derivative, Hedging, and Pledging Transactions.  We have a policy which regulates the trading in our securities by directors, officers and key employees. In addition to dealing with such matters as quarterly blackouts and Rule 10b5-1 trading, it prohibits derivative and hedging transactions involving Cameron securities and also prohibits pledging and otherwise using Cameron securities as collateral and holding Cameron securities accounts that are margined.

Stock Ownership Requirements.  We have stock ownership requirements for executives and other key employees. Within five years of being appointed an executive or other key employee of our company, or being promoted to a position requiring increased ownership, the executive or employee is required to directly own Common Stock having a market value or cost basis, whichever is higher, equal to at least the following multiple of his or her base salary:

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Level

Base Salary
Multiple

Chief Executive Officer

6

Chief Operating Officer

4

Executive Vice President

4

Senior Vice President

3

Vice President

2

All Other Executive Long-Term Incentive Program Participants

2 or 1

All NEOs meet or exceed their ownership requirement or are within the five-year period given to achieve compliance. The ownership interests of the NEOs individually, and executives as a whole, are set out in “Security Ownership of Management”.

Employment, Severance and Change-in-Control Arrangements.

Employment Contracts.  We have no employment contracts with any of our executive officers.

Executive Severance Policy.  We have an Executive Severance Policy for all executive officers, including the NEOs. The Policy provides for salary continuation for 12 months or 24 months, depending on grade level, for a covered executive if such executive’s employment with our Company is terminated by us for any reason other than cause. Participation in the annual incentive plan is prorated through the last day of employment and determined based on achievement of the goals and objectives established for the applicable year, but no entitlements are earned during the severance period. The amount of these payments, had any of the NEOs been terminated for any reason other than cause on December 31, 2014, is set out under the caption “Payments Under Executive Severance Policy.”

We provide executive severance because we recognize the impact on individuals of our need to be able to freely make changes at the executive level, and of the relatively more difficult employment transition encountered when executive-level employees are terminated with possibly little to no notice.

Change-in-Control Agreements.  We have change-in-control agreements with 21 executive officers, including each of our NEOs, except Mr. Moore, whose agreement terminated when his intent to retire was announced in May 2015. Payment under each of these agreements would only be made if the executive officer were to be terminated in connection with a change in control (“double trigger”). The agreements entitle the executive, if the executive is discharged without “cause” or resigns for “good reason” in conjunction with or within two years of a “change in control,” to a payment equal to a multiple of: (i) base salary; (ii) the higher of the officer’s target annual incentive award for the year of termination or highest such award earned by the officer during any of the past three years; and (iii) the value of annual benefits and perquisites. The multiple varies from 3X to 1X, depending on when the agreement was entered into and job level. Agreements entered into prior to 2009 had a multiple of 3X, and those entered into since have a 2X multiple for positions classified as a “Tier 1” executive, which NEOs would be, and a 1X multiple for others. Agreements with Messrs. Lemmer and Sledge have a 3X multiple as they predated the change in policy. The agreements with Messrs. Jones and Geiger have a 2X as they were entered into after the change. The multiple in the agreement with Mr. Rowe was changed from 2X to 3X effective as of the date he became CEO. In addition, certain agreements, including those with Messrs. Sledge and Lemmer, provided that, if any payments made under the agreement would cause the applicable executive to be subject to an excise tax because the payment is a “parachute payment” (as defined in the Internal Revenue Code), then we will pay the executive an excise tax premium in a sufficient amount to make the executive whole with respect to any additional tax that would not have been payable but for the excise tax provision. “Cause” means (i) a conviction by a court of competent jurisdiction, from which no further appeal can be taken, of a felony grade crime involving moral turpitude, or (ii) a willful failure to perform substantially one’s duties with our company (other than a failure due to physical or mental illness) which is materially and demonstrably injurious to us. No act or failure to act will be considered “willful” unless done, or omitted to be done, in bad faith and without reasonable belief that the action or omission was in, or not opposed to, our best interests.

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“Good reason” for termination includes any of the following events that occur without the executive officer’s consent: a change in status, title(s) or position(s) as an officer of our company that is not a promotion; a reduction in base salary; termination of participation in an ongoing compensation plan; relocation; failure of a successor of our company to assume the objectives under the agreement; termination by us other than for cause; prohibition from engaging in outside activities permitted by the agreement; or any continuing material default by us in the performance of our obligations under the agreement.

A “change in control” of our company will occur, for purposes of these agreements, if (i) any person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or indirectly, of our securities representing 20% or more of the combined voting power of our outstanding voting securities, other than through the purchase of voting securities directly from us through a private placement; (ii) the current members of the Board, or subsequent members approved by two-thirds of the current members, no longer comprise a majority of the Board; (iii) our company is merged or consolidated with another corporation or entity and our stockholders own less than 70% of the outstanding voting securities of the surviving or resulting corporation or entity; (iv) our company is merged or consolidated with another corporation or entity and the consideration paid is part or all cash equivalent in value equal to 31% or more of our outstanding voting securities; (v) a tender offer or exchange offer is made and consummated by a person other than our company for the ownership of 20% or more of our voting securities; or (vi) there has been a disposition of all or substantially all of our assets. We recognized that, as is the case with many publicly held corporations, the possibility of a change in control could arise and that such possibility, and the uncertainty and questions it could raise among our executive officers, could cause a distraction and result in the departure of one or more of them to our Company’s and our stockholders’ detriment. The Committee has determined that it was in the best interests of our company and our stockholders to help assure the continuation of service by certain executive officers, and to reinforce and encourage their attention and dedication to their assigned duties without distraction in circumstances arising from the possibility of a change in control. The Committee believed it important, when we or our stockholders receive a proposal for or notice of a change in control, or consider one ourselves, that we maintain a sound and vital management team and our executives be able to assess and advise our Company as to whether such transaction would be in the best interests of our company and our stockholders, and to take such other action regarding the transaction as our Board of Directors determines to be appropriate, without being influenced by the uncertainties of their own situations. We also believe that entering into change-in-control agreements with some of our executive officers has helped us attract and retain the level of executive talent needed to achieve our goals.

The elements of the severance benefits and the amounts of each were approved by the Committee at the time the agreements were entered into, or most recently modified, based on the Committee’s assessment of what was appropriate and competitive at that time.

The transaction provided for by the Agreement and Plan of Merger will constitute a “change in control” under our Change-in-Control Agreements when the transaction is closed and the merger accomplished.  As discussed earlier, payouts to be made pursuant to these Change-In-Control Agreements, should the transaction provided for by the stockholder-approved Agreement and Plan of Merger occur, were approved by an advisory Golden Parachute vote of stockholders.

Tax Implications of Executive Compensation.  Section 162(m) of the Code places a limit of $1 million on the amount of annual compensation that may be deducted by us in any year with respect to an NEO. Certain performance-based compensation subject to performance criteria approved by stockholders is not subject to this deduction limitation and, as a result, annual incentive compensation paid pursuant to our Management Incentive Compensation Plan and stock options, RSU and PRSU awards granted under our Equity Incentive Plan generally are intended to qualify as performance-based compensation and should be deductible.

The Committee is mindful of the limitation and has structured the various elements of our executive compensation to fall within the limit or the exception. The Committee and/or the Board of Directors,

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however, may from time to time, in circumstances deemed appropriate, award compensation that may not be deductible, in order to, in their judgment, compensate executives in a manner commensurate with performance and the competitive market for executive talent.

SUMMARY COMPENSATION TABLE

The following table sets forth the compensation earned for services rendered to us by our NEOs for the fiscal year ended December 31, 2015.

Some differences in the compensation of our NEOs result from the fact that our compensation philosophy is to pay competitively by position. In order to determine competitive levels, the independent compensation consultant, at the direction of the Compensation Committee, benchmarks each position against employees holding similar positions in our peer group and in the manufacturing industry in general. Our compensation policy and benchmarking practices are explained in the CD&A section set out earlier in this Item 11 of the Form 10-K/A.

Name and Principal
Position
(1)

Year

Salary ($)

Bonus
($)

Stock
Awards
($)
(2)(3)(5)(6)

Option
Awards
($)
(1)(4)(5)

Non-Equity
Incentive Plan
Compensation
($)
(7)

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)
(8)

All Other
Compensation
($)
(9)

Total
($)

 

R. Scott Rowe

 

2015

 

729,842

 

 

6,708,125

 

2,038,583

 

1,262,015

 

(3,796)

 

151,188

 

10,885,957

President and CEO

2014

486,338

 

1,019,919

999,744

525,946

14,741

103,019

3,149,707

Jack B. Moore

2015

865,385

 

2,839,967

0

1,880,156

(83,287)

291,502

5,793,723

Chairman and

2014

1,125,000

0

4,139,894

2,839,314

1,814,400

128,053

217,626

10,264,287

CEO

2013

1,125,000

0

3,919,852

2,719,985

644,288

231,647

304,309

8,945,081

Charles M. Sledge

2015

652,100

 

2,492,434

682,110

906,732

150,225

152,659

5,036,260

Sr. Vice President &

2014

646,490

0

1,329,921

899,780

695,106

(15,359)

110,797

3,666,735

Chief Financial Officer

2013

617,500

0

1,319,937

879,991

246,012

184,452

137,892

3,385,784

William C. Lemmer

2015

556,200

 

1,941,450

529,190

676,712

3,207

125,174

3,831,933

Sr. Vice President &

2014

552,088

0

1,032,899

705,828

519,404

151,815

102,270

3,064,304

General Counsel

2013

535,000

41,832

1,019,883

679,996

269,265

503,685

115,527

3,165,188

Steven P. Geiger

Vice President &

Chief Administrative Officer

2015

450,000

0

1,319,955

359,798

508,394

(500)

100,750

2,738,397

Hunter W. Jones

Vice President & President, Drilling Systems

2015

397,300

0

989,889

269,845

409,114

(5,486)

88,743

2,149,413

(1)No information is reported for Mr. Rowe for 2013, and Messrs. Geiger and Jones for 2014 and 2013, as they were not named executive officers under the rules of the SEC for those years.

(2)The amounts included in the “Stock Awards” and “Option Awards” columns represent the “grant date fair value” in 2015, 2014 and 2013 as determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, regarding Stock Compensation (“ASC 718”).

(3)The “grant date fair value” for Stock Awards awarded as (i) PRSUs with an ROIC goal is $49.95 per share, the closing price of Common Stock on 1/1/2015, the date of grant, (ii) PRSUs with a TSR goal is $57.17, calculated using a Monte Carlo valuation as of 1/1/2015, the date of grant; and for Mr. Rowe’s October 5, 2015 award it is $96.83; and (iii) RSUs is $65.97, based on the closing price of Common Stock on 10/14/2015, the date of grant.

(4)The “grant date fair value” for Option Awards is $14.46, calculated in accordance with ASC 718, and based on an exercise price equal to the closing price of Common Stock of $65.97 per share on 10/14/2015, the date of grant.

(5)For both RSU and stock option grants, the value shown is what is reflected in our financial statements. See Cameron’s Annual Report on Form 10-K for the year ended December 31, 2015, and Annual Reports for the years ended December 31, 2014 and 2013 for a complete description of the valuation assumptions. Amounts included for 2015 PRSUs represent target. Threshold, target and maximum award levels for the PRSUs are shown in the table below:

Name

Threshold ($)

Target ($)

Maximum ($)

R. Scott Rowe

437,476

999,951

1,999,902

 

226,727

518,232

1,036,464

Jack B. Moore

1,242,486

2,839,967

5,679,934

Charles M. Sledge

393,742

899,985

1,799,969

William C. Lemmer

308,858

705,964

1,411,928

Steven P. Geiger

209,985

479,959

959,919

Hunter W. Jones

157,474

359,941

719,882

(6)PRSUs granted on January 1, 2014, and included in the Stock Awards values reported in the 2015 Summary Compensation Table are valued not at “grant date fair value” but at a value that includes the actual impact of performance achievement, which was known at the

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time of disclosure. These PRSUs have issuedbeen revalued using the “grant date fair value” for the 2014 Stock Awards in this Summary Compensation Table.

(7)The amount shown for each NEO in the “Non-Equity Incentive Plan Compensation” column is attributable to MICP annual incentive compensation awards earned in fiscal years 2015, 2014, and 2013, but paid in 2016, 2015 and 2014, respectively.

(8)The amounts shown in this column reflect market-based returns on balances held under our report thereon dated February 20,deferred compensation plans.

(9)The figures set out as “All Other Compensation” for 2015 (includedare the sum of the Total Other Annual Compensation attributable to both (i) retirement benefits and (ii) welfare benefits and perquisites and are set out in the following two tables:

(i)Retirement Benefits

Name

Company
Contributions to
Retirement
Savings Plan
($)

Company
Retirement
Contributions to
NQ DC Plan
($)

Company
Match
Contributions in
NQ DC Plan
($)

Total Other
Annual
Compensation
attributable to
retirement
benefits
($)

R. Scott Rowe

23,840

29,724

59,447

113,011

Jack B. Moore

23,850

72,444

144,887

241,181

Charles M. Sledge

23,848

32,466

64,932

121,247

William C. Lemmer

23,850

24,318

48,636

96,804

Steven P. Geiger

23,850

15,030

30,061

68,941

Hunter W. Jones

23,850

13,621

20,851

58,322

(ii)Welfare Benefits and Perquisites

Name

Spousal
Travel
($)(1)

Excess
Life
($)

Welfare
Benefits
($)(2)

Financial
Planning
Services
($)

Total Other Annual
Compensation
attributable to
welfare benefits and
perquisites
($)

R. Scott Rowe

10,542

1,140

18,350

8,145

38,176

Jack B. Moore

21,148

5,788

15,174

8,211

50,321

Charles M. Sledge

0

2,622

18,658

10,132

31,412

William C. Lemmer

0

14,832

3,718

9,820

28,370

Steven P. Geiger

0

6,732

15,015

10,062

31,808

Hunter W. Jones

0

3,842

18,370

8,209

30,422

(1)Spousal travel costs are costs incurred by us when a spouse accompanies an NEO to a function or event for business purposes. This cost is imputed to the NEO as income.

(2)Welfare benefits are the employer-paid portions of premiums for Medical (including Health Savings Account Contribution), Dental, Life, AD&D and LTD paid for the benefit of the employee.

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Grants of Plan-Based Awards in Fiscal Year 2015

The following table provides information on non-equity incentive plan awards, stock options PRSUs and RSUs granted, and the grant date fair value of these awards.

 

 

 

 

 

 

 

 

Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(2)

 

All Other
Stock
Awards:
Number of
Shares of

 

All Other
Option
Awards:
Number of
Securities

 

Exercise
or Base
Price of

 

Grant Date
Fair Value of
Stock and

 

Name

 

Award Type

 

Grant
Date
(1)

 

Committee
Approval Date

 

Threshold
($)(3)

 

Target
($)(3)

 

Maximum
($)(3)

 

Stock or
Units
(#)

 

Underlying
Options

(#)

 

Option
Awards
($/Sh)

 

Option
Awards

($)(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R. Scott Rowe

 

Annual MICP

 

1/1/2015

 

2/18/2015

 

263,207

 

656,858

 

1,313,716

 

 

 

 

 

 

 

 

 

 

 

PRSU

 

1/1/2015

 

10/16/2014

 

 

 

 

 

 

 

18,755

 

 

 

 

 

999,951

 

 

 

Special PRSU

 

10/05/2015

 

8/21/2015

 

 

 

 

 

 

 

6,738

 

 

 

 

 

518,232

 

 

 

Special RSU

 

10/05/2015

 

8/21/2015

 

 

 

 

 

 

 

8,126

 

 

 

 

 

518,358

 

 

 

Annual RSU

 

10/14/2015

 

10/13/2015

 

 

 

 

 

 

 

72,154

 

 

 

 

 

4,759,999

 

 

 

Annual Option

 

10/14/2015

 

10/13/2015

 

 

 

 

 

 

 

 

 

140,981

 

65.97

 

2,038,853

 

Jack B. Moore

 

Annual MICP

 

1/1/2015

 

2/18/2015

 

392,127

 

1,081,731

 

2,163,463

 

 

 

 

 

 

 

 

 

 

 

PRSU

 

1/1/2015

 

10/16/2014

 

 

 

 

 

 

 

53,266

 

 

 

 

 

2,839,967

 

Charles M. Sledge

 

Annual MICP

 

1/1/2015

 

2/18/2015

 

189,109

 

521,680

 

1,043,360

 

 

 

 

 

 

 

 

 

 

 

PRSU

 

1/1/2015

 

10/16/2014

 

 

 

 

 

 

 

16,880

 

 

 

 

 

899,985

 

 

 

Annual RSU

 

10/14/2015

 

10/13/2015

 

 

 

 

 

 

 

24,139

 

 

 

 

 

1,592,450

 

 

 

Annual Option

 

10/14/2015

 

10/13/2015

 

 

 

 

 

 

 

 

 

47,166

 

65.97

 

682,110

 

William C. Lemmer

 

Annual MICP

 

1/1/2015

 

2/18/2015

 

141,136

 

389,340

 

778,680

 

 

 

 

 

 

 

 

 

 

 

PRSU

 

1/1/2015

 

10/16/2014

 

 

 

 

 

 

 

13,241

 

 

 

 

 

705,964

 

 

 

Annual RSU

 

10/14/2015

 

10/13/2015

 

 

 

 

 

 

 

18,728

 

 

 

 

 

1,235,486

 

 

 

Annual Option

 

10/14/2015

 

10/13/2015

 

 

 

 

 

 

 

 

 

36,592

 

65.97

 

529,190

 

Steven P. Geiger

 

Annual MICP

 

1/1/2015

 

2/18/2015

 

106,031

 

292,500

 

585,000

 

 

 

 

 

 

 

 

 

 

 

PRSU

 

1/1/2015

 

10/16/2014

 

 

 

 

 

 

 

9,002

 

 

 

 

 

479,959

 

 

 

Annual RSU

 

10/14/2015

 

10/13/2015

 

 

 

 

 

 

 

12,733

 

 

 

 

 

839,996

 

 

 

Annual Option

 

10/14/2015

 

10/13/2015

 

 

 

 

 

 

 

 

 

24,879

 

65.97

 

359,798

 

Hunter W. Jones

 

Annual MICP

 

1/1/2015

 

2/18/2015

 

106,557

 

247,000

 

494,000

 

 

 

 

 

 

 

 

 

 

 

PRSU

 

1/1/2015

 

10/16/2014

 

 

 

 

 

 

 

6,751

 

 

 

 

 

359,941

 

 

 

Annual RSU

 

10/14/2015

 

10/13/2015

 

 

 

 

 

 

 

9,549

 

 

 

 

 

629,948

 

 

 

Annual Option

 

10/14/2015

 

10/13/2015

 

 

 

 

 

 

 

 

 

18,659

 

65.97

 

269,845

 

(1)A discussion of grant practices is included in Part II, Item 8IV – Executive Compensation Elements and Mix.

(2)The 2015 MICP annual incentive compensation objectives were approved in December, 2014. Actual payout amounts of the 2015 MICP awards were approved in February 2016 and are included as 2015 compensation in the Summary Compensation Table.

(3)The amounts shown reflect the range of possible MICP annual incentive compensation awards. In October 2014, our Compensation Committee established target MICP annual incentive compensation awards for 2015, expressed as a percentage of each NEO’s 2015 base salary. The percentages are noted in “Target-Award Opportunities”. In February 2015, the Committee approved individual and company performance objectives for the MICP for 2015. The dollar amount shown in the “target” column represents the target award of each NEO for 2015. The amount shown in the “maximum” column represents the maximum amount that could be paid under the MICP for 2015. The amount shown in the “threshold” column represents the amount payable if only the minimum level of company achievement of performance objectives were attained. Please see Part IV – Executive Compensation Elements and Mix — Annual Incentive Compensation” for more information regarding our MICP and the 2013 MICP awards and performance measures.

(4)The amounts included in the “Grant Date Fair Value of Stock and Option Awards” column represent the fair value on the date of grant. See Footnote No. 2 and 3 to the Summary Compensation Table for information regarding the grant date fair value of these awards.

(5)Mr. Rowe received a one-time grant with a value of $1,036,717 to reflect the fact that he would serve as Chief Executive Officer in the fourth quarter of 2015.

Outstanding Equity Awards at Fiscal Year-End

The following table presents information about outstanding stock option awards classified as “exercisable” and “unexercisable” as of December 31, 2015, for our two CEOs that served for portions of 2015, our Chief Financial Officer and the two other NEOs, as well as RSU and PRSU awards to the NEOs that were not yet vested as of December 31, 2015.

 

 

Option Awards

 

Stock Awards

 

Name

 

Option
Grant
Date
(1)

 

Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)

 

Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)

 

Option
Exercise
Price
($)

 

Option
Expiration
Date

 

Restricted
Stock Units/
Performance Units
Grant Date
(2)

 

Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)

 

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
(3)

 

R. Scott Rowe

 

11/06/2009

 

2,548

 

0

 

39.24

 

2016

 

01/01/2013

 

7,101

 

448,783

 

 

 

10/20/2010

 

2,335

 

0

 

42.81

 

2017

 

10/17/2013

 

2,667

 

168,554

 

 

 

11/16/2011

 

20,732

 

0

 

51.24

 

2021

 

01/01/2014

 

8,656

 

547,059

 

 

 

10/18/2012

 

25,510

 

0

 

56.05

 

2022

 

10/16/2014

 

8,685

 

548,892

 

 

 

10/17/2013

 

21,412

 

10,706

 

64.97

 

2023

 

01/01/2015

 

18,755

 

1,185,316

 

 

 

10/16/2014

 

22,973

 

45,944

 

57.57

 

2024

 

10/05/2015

 

14,864

 

939,405

 

 

 

10/14/2015

 

0

 

140,981

 

65.97

 

2025

 

10/14/2015

 

72,154

 

4,560,133

 

Jack B. Moore

 

10/20/2010

 

212,665

 

0

 

42.81

 

2017

 

10/18/2012

 

7,612

 

481,078

 

 

 

11/16/2011

 

176,917

 

0

 

51.24

 

2021

 

01/01/2013

 

45,449

 

2,872,377

 

 

 

10/18/2012

 

163,265

 

0

 

56.05

 

2022

 

10/17/2013

 

13,954

 

881,893

 

 

 

10/17/2013

 

110,977

 

57,027

 

64.97

 

2023

 

01/01/2014

 

45,283

 

2,861,886

 

 

 

10/16/2014

 

65,243

 

130,484

 

57.57

 

2024

 

10/16/2014

 

24,665

 

1,558,828

 

 

 

 

 

 

 

 

 

 

 

 

 

01/01/2015

 

53,266

 

3,366,411

 

Charles M. Sledge

 

11/06/2009

 

2,548

 

0

 

39.24

 

2016

 

10/18/2012

 

2,616

 

165,331

 

 

 

10/20/2010

 

99,900

 

0

 

42.81

 

2017

 

01/01/2013

 

15,623

 

987,374

 

 

 

11/16/2011

 

55,286

 

0

 

51.24

 

2021

 

10/17/2013

 

4,514

 

285,285

 

 

 

10/18/2012

 

56,122

 

0

 

56.05

 

2022

 

01/01/2014

 

14,650

 

925,880

 

 

 

10/17/2013

 

36,236

 

18,118

 

64.97

 

2023

 

10/16/2014

 

7,816

 

493,971

 

 

 

10/16/2014

 

20,676

 

41,350

 

57.57

 

2024

 

01/01/2015

 

16,880

 

1,066,816

 

 

 

10/14/2015

 

0

 

47,166

 

65.97

 

2025

 

10/14/2015

 

24,139

 

1,525,585

 

William C. Lemmer

 

11/06/2009

 

2,548

 

0

 

39.24

 

2016

 

10/18/2012

 

2,022

 

127,790

 

 

 

10/20/2010

 

64,900

 

0

 

42.81

 

2017

 

01/01/2013

 

12,071

 

762,887

 

 

 

11/16/2011

 

49,758

 

0

 

51.24

 

2021

 

10/17/2013

 

3,488

 

220,442

 

 

 

10/18/2012

 

43,367

 

0

 

56.05

 

2022

 

01/01/2014

 

11,320

 

715,424

 

 

 

10/17/2013

 

28,001

 

14,000

 

64.97

 

2023

 

10/16/2014

 

6,131

 

387,479

 

 

 

10/16/2014

 

16,219

 

32,437

 

57.57

 

2024

 

01/01/2015

 

13,241

 

836,831

 

 

 

10/14/2015

 

0

 

36,592

 

65.97

 

2025

 

10/14/2015

 

18,728

 

1,183,610

 

 

 

 

 

 

 

 

 

 

 

 

 

10/18/2012

 

654

 

41,333

 

Steven P. Geiger

 

10/17/2013

 

16,471

 

8,235

 

64.97

 

2023

 

02/04/2013

 

3,090

 

195,288

 

 

 

10/16/2014

 

11,027

 

22,053

 

57.57

 

2025

 

06/10/2013

 

1,605

 

101,436

 

 

 

10/14/2015

 

0

 

24,879

 

65.97

 

2016

 

10/17/2013

 

2,052

 

129,686

 

 

 

 

 

 

 

 

 

 

 

 

 

01/01/2014

 

6,658

 

420,786

 

 

 

 

 

 

 

 

 

 

 

 

 

10/16/2014

 

4,168

 

263,418

 

 

 

 

 

 

 

 

 

 

 

 

 

01/01/2015

 

9,002

 

568,926

 

 

 

 

 

 

 

 

 

 

 

 

 

10/14/2015

 

12,733

 

804,726

 

Hunter W. Jones

 

11/16/2011

 

11,057

 

0

 

51.24

 

2021

 

01/01/2013

 

3,905

 

246,796

 

 

 

10/20/2010

 

7,005

 

0

 

42.81

 

2017

 

 

 

 

 

 

 

 

 

10/18/2012

 

14,030

 

0

 

56.05

 

2022

 

10/17/2013

 

1,641

 

103,711

 

 

 

10/17/2013

 

13,177

 

6,588

 

64.97

 

2023

 

01/01/2014

 

5,326

 

336,603

 

 

 

10/16/2014

 

8,270

 

16,540

 

57.57

 

2024

 

10/16/2014

 

2,084

 

131,709

 

 

 

10/14/2015

 

0

 

18,659

 

65.97

 

2025

 

01/01/2015

 

6,751

 

426,663

 

 

 

 

 

 

 

 

 

 

 

 

 

10/14/2015

 

9,549

 

603,497

 

For better understanding of this table, we have included separate columns to show the grant date of stock options and restricted stock units/performance units.

Zeroes indicate there are no more unexercisable options available in the award.

(1)Options awarded prior to 2013 are fully vested. The vesting schedules for the option awards made during or after 2013 are as follows:

Grant Date

Option Vesting Schedule

Remaining
Vesting Dates

10/17/2013

One-third vests each year for three years from date of grant

10/17/2016

10/16/2014

One-third vests each year for three years from date of grant

10/16/2016
10/16/2017

10/14/2015

One-third vests each year for three years from date of grant

10/14/2016
10/14/2017
10/14/2018

(2)The vesting schedules for RSU and PRSU awards are as follows:

Grant Date

RSU Vesting Schedule

Remaining
Vesting Dates

10/17/2013

One-third vests each year for three years from date of grant

01/01/2017

10/16/2014

One-third vests each year for three years from date of grant

01/01/2017
01/01/2018

10/14/2015

One-third vests each year for three years from date of grant

01/01/2016
01/01/2017
01/01/2018

Grant Date

PRSU Vesting Schedule

Remaining
Vesting Dates

01/01/2014

Vests three years from date of grant (performance-based)

12/31/2016

01/01/2015

Vests three years from date of grant (performance-based)

12/31/2016

12/31/2017

(3)Based on the closing price of our Common Stock as of December 31, 2015 of $63.20, as reported on the New York Stock Exchange.

Option Exercises and Stock Vested

The following table provides additional information about the value realized by the persons named in the Summary Compensation Table on option exercises and stock award vesting during the year ended December 31, 2015.

 

 

Option Awards

 

Stock Awards

 

 

 

 

 

 

 

 

 

 

 

Name

 

Number of Shares
Acquired on
Exercise (#)

 

Value
Realized on
Exercise ($)

 

Number of Shares
Acquired on
Vesting (#)

 

Value
Realized on
Vesting ($)

 

 

 

 

 

 

 

 

 

 

 

R. Scott Rowe

 

12,917

 

879,590

 

8,448

 

430,643

 

Jack B. Moore

 

360,250

 

21,592,470

 

73,497

 

3,588,222

 

Charles M. Sledge

 

59,452

 

4,050,496

 

24,947

 

1,245,940

 

William C. Lemmer

 

10,000

 

703,572

 

21,997

 

1,101,181

 

Steven P. Geiger

 

-

 

-

 

2,632

 

138,294

 

Hunter W. Jones

 

0

 

0

 

5,676

 

294,445

 

Director Compensation

The compensation program for our non-employee directors has been developed by the Compensation Committee, after consideration of the recommendations and competitive market data provided by FWC, whom the Compensation Committee has retained as its independent compensation consultant. The program has been approved by the full Board. The following sets out the components of the compensation program for our non-employee directors. Employee directors receive no additional compensation for serving on our Board:

Equity Grant Upon Initial Election

$250,000

Annual Board Retainer

$  50,000

Annual Equity Grant1

$250,000

Annual Non-Executive Chairman Retainer

$225,000

Lead Director Retainer

$  25,000

Annual Committee Chair Retainer:

Audit Committee

$  20,000

Compensation Committee

$  15,000

Nominating and Governance Committee

$  15,000

Board/Committee Meeting Fee

$    2,500

Telephonic Meeting Fee

$    1,000

(1)  If a director’s election occurs between annual meetings of stockholders, the value of the annual equity grant upon initial election will be a pro-rata portion of the grant value equal to the remaining balance of the board year (the months until the next annual meeting of stockholders

Equity grants, both the initial and annual, are made in the form of deferred stock units, or DSUs. One quarter of each year’s annual equity grant is earned and vests at the end of each quarter of service as a director during that year. Vested DSUs are payable in Common Stock at the earlier of three years from the grant date or the end of Board tenure, unless electively deferred by the director for a longer period. Directors may elect to receive their Board and Committee Chair retainers in cash or defer them under our Deferred Compensation Plan for Non-Employee Directors. Deferral can be made for such periods of time as selected by the director and can be made into Common Stock or cash, at the director’s election. No above-market interest or preferential earnings, as defined for purposes of the SEC’s disclosure rules applicable to proxy statements, are credited or paid on cash deferrals.

Directors are eligible to use company-leased aircraft for personal travel, provided they reimburse us for the incremental operating cost of any such use. Spouses of directors are invited to our annual off-site Board meeting. Directors are reimbursed by us for the cost of their spouses’ travel to and from that meeting.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership of Certain Beneficial Owners

The following table lists the stockholders known by us to have been the beneficial owners of more than 5% of the common stock of Cameron (Common Stock”) outstanding as of December 31, 2015, and entitled to be voted at the Meeting. This information is based on statements filed by the indicated stockholders with the Securities and Exchange Commission (the “SEC”).

Name and Address of Beneficial Owner

 

Number of Shares of
Common Stock

 

Beneficial
Ownership

 

Percent of
Common
Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Vanguard Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100 Vanguard Blvd
Malvern, PA 19355

 

16,467,347

 

(1)

 

8.82%

 

 

 

 

 

 

 

 

 

BlackRock, Inc.

 

 

 

 

 

6.40%

 

 

 

 

 

 

 

 

 

40 East 52nd Street
New York, New York 10022

 

12,147,825

 

(2)

 

 

 

 

 

 

 

 

 

 

 

State Street Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

One Lincoln Street
Boston, Massachusetts 02111

 

9,865,040

 

(3)

 

5.20%

 

(1)

According to a Schedule 13G filed with the SEC by The Vanguard Group, Inc. (“Vanguard”) on February 10, 2016, Vanguard had sole voting power over 351,883 shares of Common Stock, shared voting power over 18,300 shares of Common Stock, sole dispositive power over 16,467,347 shares of Common Stock, and shared dispositive power over 378,264 shares of Common Stock. According to that filing, Vanguard Fiduciary Trust Company, a wholly owned subsidiary of Vanguard, is the beneficial owner of 296,464 shares or 0.15% of the Common Stock outstanding of the Company as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly owned subsidiary of Vanguard, is the beneficial owner of 137,219 shares or 0.07% of Common Stock as a result of its serving as investment manager of Australian investment offerings.

(2)

According to a Schedule 13G filed with the SEC by BlackRock Inc. (“BlackRock”) on February 10, 2016, BlackRock had sole voting power over 10,370,751 shares of Common Stock and sole dispositive power over 12,147,825 shares of Common Stock. According to the filing, various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of the Common Stock, but no one person’s interest is more than five percent of the total outstanding Common Stock.

(3)

According to a Schedule 13G filed with the SEC by State Street Corporation (“State Street”) on February 12, 2016, State Street had shared voting power and shared dispositive power over 9,865,040 shares of Common Stock.

Security Ownership of Management

The following table sets forth, as of March 2, 2016, unless otherwise noted, the number of shares of Common Stock beneficially owned (as defined by the SEC) by each current director, director nominee, and each executive officer named in the Summary Compensation Table included herein who is not also a director, and by all directors and executive officers as a group.

Directors

 

Number of Shares of
Common Stock Owned

 

Number of Shares
That May Be
Acquired By
Options Exercisable
Within 60 Days
(1)

 

  Total

 

Percent of
Class

 

 

 

 

 

 

 

 

 

 

 

H. Paulett Eberhart

 

10,491

 

0

 

10,491

 

*

 

Peter J. Fluor

 

83,935

 

0

 

83,935

 

*

 

Douglas L. Foshee

 

41,973

 

0

 

41,973

 

*

 

James T. Hackett

 

11,719

 

0

 

11,719

 

*

 

Rodolfo Landim

 

18,060

 

0

 

18,060

 

*

 

Jack B. Moore(2)

 

286,399

 

579,067

 

865,466

 

*

 

Michael E. Patrick

 

66,867

 

0

 

66,867

 

*

 

Timothy J. Probert

 

4,823

 

0

 

4,823

 

*

 

Jon Erik Reinhardsen

 

36,669

 

0

 

36,669

 

*

 

R. Scott Rowe(2)

 

136,224

 

95,510

 

231,734

 

*

 

Brent J. Smolik

 

6,524

 

0

 

6,524

 

*

 

Bruce W. Wilkinson

 

45,209

 

0

 

45,209

 

*

 

 

 

 

 

 

 

 

 

 

 

Executive Officers Named in the Summary Compensation Table Other Than Those Listed Above:

 

 

 

 

 

 

 

 

Charles M. Sledge(2)

 

159,555

 

270,768

 

430,323

 

*

 

William C. Lemmer (2)

 

107,934

 

204,793

 

312,727

 

*

 

Steven P. Geiger (2)

 

21,341

 

27,498

 

45,839

 

*

 

Hunter W. Jones (2)

 

51,086

 

53,539

 

104,625

 

*

 

All directors and executive officers
as a group (20 persons, including those named above)

 

1,149,317

 

1,297,844

 

2,447,161

 

0.012

 

*Indicates ownership of less than one percent of Common Stock outstanding.

(1)Consists of stock options that are currently exercisable or that will become exercisable on or before May 1, 2016.

(2)Includes shares held in our Retirement Savings Plan as of March 2, 2016.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee of the Board is composed entirely of independent directors. None of the members of the Committee during 2015 or as of the date of this Form 10-K).10-K/A is or has been an officer or employee of Cameron and no executive officer of Cameron has served on the compensation committee or board of any company that employed any member of our Compensation Committee or the Board.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Policy With Respect to Related Party Transactions.  Our audits also includedBoard has adopted a written policy and procedures for the financial statement schedule includedreview of any transaction, arrangement or relationship in Item 15(a)(2)which Cameron is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% or greater stockholders (or their immediate family members) (each, a “related person”) has a direct or indirect material interest.

If a related person proposes to enter into such a transaction, arrangement or relationship (a “related-person transaction”), the related person must report the proposed transaction and the Board’s Nominating and Governance Committee (for purposes of this Form 10-K.  This scheduleSection, the “Committee”) will review, and if appropriate, approve the proposed related-person transaction. Any related-person transaction that is ongoing in nature will be reviewed annually.

A related-person transaction will be considered approved or ratified if it is authorized by the responsibilityCommittee after full disclosure of the Company’srelated person’s interest in the transaction. As appropriate for the circumstances, the Committee will review and consider: the approximate dollar value of the amount involved; the related person’s involvement in the negotiation of the terms and conditions, including the price of the transaction; the related person’s interest in the related-person transaction; whether the transaction was undertaken in the ordinary course of our business; whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party; the purpose of, and the potential benefits to us of, the transaction; and any other information regarding the transaction or the related person in the context of the proposed transaction that the Committee determines to be relevant to its decision to either approve or disapprove the transaction.

The Committee will approve or ratify the transaction only if the Committee determines that, under all of the circumstances, the transaction is not inconsistent with Cameron’s best interests.

The Committee may impose any conditions on the related-person transaction that it deems appropriate.

In addition to the transactions that are excluded by the instructions to the SEC’s related-person transaction disclosure requirements, the Board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related-person transactions for purposes of this policy: 1) interests arising solely from the related person’s position as an executive officer of another entity that is a participant in the transaction, where: (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $1 million or 2% of the annual consolidated gross revenues of the other entity that is a party to the transaction, and (d) the amount involved in the transaction equals less than 2% of our company’s annual consolidated gross revenues; and 2) a

transaction that is specifically contemplated by provisions of our Certificate of Incorporation or Bylaws, such as a contract of indemnity.

During 2015, there were no Related-Person Transactions.

Director Independence.  Our Board believes that a majority of our directors should be independent, as defined under the standards adopted by the New York Stock Exchange (“NYSE”). The Board makes an annual determination as to the independence of each of the directors. Under the NYSE standards, no director can qualify as independent unless the Board affirmatively determines that the director has no material relationship with our company that might interfere with the exercise of his or her independence from our management.  Our responsibility is to express

In evaluating each director’s independence, the Board considers all relevant facts and circumstances in making a determination of independence. In particular, when assessing the materiality of a director’s relationship with our company, the Board considers the issue not merely from the standpoint of the director, but also from the standpoint of persons or organizations with which the director has an opinionaffiliation. In its determination of independence, the Board reviewed and considered all relationships and transactions between each director, his or her family members or any business, charity or other entity in which the director has an interest, and Cameron, its affiliates, or any entity in which our senior management has an interest. As a result of this review, and based on the NYSE standards of independence, the Board affirmatively determined that Ms. Eberhart and each of Messrs. Fluor, Foshee, Landim, Patrick, Probert, Reinhardsen, Smolik and Wilkinson are independent from Cameron and its management. In addition, the Board affirmatively determined that each of the members of the Audit Committee is independent under the additional standards for audit committee membership under SEC rules. Mr. Moore and Mr. Rowe are not independent directors, as Mr. Moore is a former Cameron employee and Mr. Rowe is a current Cameron employee.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

Principal Accounting Firm Fees

The following table sets forth the U.S. dollar equivalent fees billed or to be billed by our audits.


Inprincipal accounting firm, Ernst & Young LLP, for services rendered for the years ended December 31, 2015 and 2014.

 

 

Year Ended
December 31

 

 

 

 

 

 

 

 

 

2015
($)

 

2014
($)

 

   Audit Fees(1)

 

6,878,469

 

8,205,334

 

   Audit-Related Fees:

 

 

 

 

 

   Benefit plan audits

 

51,824

 

207,062

 

   Other

 

4,000

 

306,080

 

 

 

55,824

 

513,142

 

   Tax Fees:

 

 

 

 

 

  Tax compliance, consulting and advisory services

 

1,917,825

 

1,978,569

 

 

 

 

 

 

 

   TOTAL

 

8,852,118

 

10,697,045

 

(1)Included within Audit Fees are services for our opinion, the financial statement schedule referred to above, when considered in relation to the basicannual audits of our consolidated financial statements takenand of our internal control over financial reporting, quarterly reviews and international statutory audits required by various government authorities.

The Audit Committee performs an annual review and approves the scope of services and proposed fees of our principal accounting firm. The Audit Committee concluded that the provision of services, other than audit services, in 2015 was compatible with maintaining the accounting firm’s independence from us.

Pre-Approval Policies and Procedures

An Audit Committee policy requires advance approval of the Committee for all audit and audit-related services as a whole, presents fairly,well as tax and other services performed by the independent registered public accountants. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously approved with respect to that year, the Audit Committee must approve the permitted service before the independent registered public accountant is engaged to perform it. The Audit Committee has delegated to the Chairman of the Audit Committee authority to approve permitted services, provided that the Chairman reports any such decisions to the Audit Committee at its next regular meeting. None of the services related to the Audit-Related Fees or Tax Fees reflected in all material respects, the informationtable above were approved by the Audit Committee pursuant to the waiver of pre-approval provisions set forth therein.


/s/ Ernst & Young LLP

Houston, Texas
February 20, 2015
Schedule II - Valuation and Qualifying Accounts
(dollars in millions)

    Additions       
FOR THE YEAR ENDED 
Balance at beginning
of period
  
Charged
to costs
and
expenses
  
Charged
to other accounts
  
Deductions
(a)
  Translation  
Balance
at end
of period
 
             
DECEMBER 31, 2014:            
Allowance for doubtful accounts $21  $10  $8  $(5) $(2) $32 
Allowance for obsolete and excess inventory $109  $65  $(3) $(21) $(5) $145 
DECEMBER 31, 2013:                        
Allowance for doubtful accounts $8  $14  $  $(1) $  $21 
Allowance for obsolete and excess inventory $89  $28  $4  $(12) $  $109 
DECEMBER 31, 2012:                        
Allowance for doubtful accounts $10  $1  $  $(3) $  $8 
Allowance for obsolete and excess inventory $82  $21  $(2) $(12) $  $89 

(a)Discontinued operations, write-offs of uncollectible receivables, deductions for collections of previously reserved receivables and write-offs of obsolete inventory.

All other financial schedules are not required under the related instructions, or are inapplicable and therefore have been omitted.
87

SEC.

Table

PART IV

ITEM 15.  EXHIBITS

31.1* Certification of Contents

EXHIBIT INDEX
Exhibit NumberExhibit Index Description
3.1Restated Certificate of Incorporation of Cameron International Corporation, dated May 11, 2012, filed as Appendix C to the Company’s Supplement to the 2012 Proxy Statement, and incorporated herein by reference.
3.2Bylaws of Cameron International Corporation filed as Exhibit 3.1 to the Current Report on Form 8-K filed on April 18, 2012, and incorporated herein by reference.
3.3Amendment to the Bylaws of Cameron International Corporation filed as Exhibit 3.1 to the Current Report on Form 8-K filed on October 18, 2012, and incorporated herein by reference.
4.1Form of Indenture for senior debt securities filed as Exhibit 4.1 to the Registration Statement on Form S-3 filed with the Securities and Exchange Commission on June 23, 2008 (File No. 333-151838) and incorporated herein by reference.
Cameron International Corporation Retirement Savings Plan, as Amended and Restated, effective January 1, 2014.
10.2Merger of the NATCO Group Profit Sharing And Savings Plan with and into the Cameron International Corporation Retirement Savings Plan, effective March 17, 2010, filed as Exhibit 10.49 to the Annual Report on Form 10-K for 2010 of the Company, and incorporated herein by reference.
OneSubsea Retirement Savings Plan, as Amended and Restated effective January 1, 2015.
10.4The Company's Deferred Compensation Plan for Non-Employee Directors, filed as Exhibit 10.41 to the Annual Report on Form 10-K for 2005 of the Company, and incorporated herein by reference.
10.5The Amended and Restated Cameron International Corporation Nonqualified Deferred Compensation Plan, effective January 1, 2013 filed as Exhibit 10.18 to the Annual Report on Form 10-K for 2012 of the Company, and incorporated herein by reference.
The 2011 Management Incentive Compensation Plan, as Amended and Restated October 16, 2014, of the Company.
10.7Cameron International Corporation Equity Incentive Plan, effective January 1, 2013, as amended and restated, filed as an Appendix to the Company’s 2013 Proxy Statement, and incorporated herein by reference.
10.8Change in Control Policy of the Company, approved February 19, 1996, filed as Exhibit 10.18 to the Annual Report on Form 10-K for 1996 of the Company, and incorporated herein by reference.
Exhibit NumberExhibit Index Description
10.9Form of Change of Control Agreement, effective December 18, 2008, by and between the Company and John Bartos, Hal J. Goldie, William C. Lemmer, Joseph H. Mongrain, Jack B. Moore and Charles M. Sledge filed as Exhibit 10.17 to the Annual Report on Form 10-K for 2008 of the Company, and incorporated herein by reference.
10.10Form of Change in Control Agreement, effective June 16, 2009, by and between the Company and Mr. H. Keith Jennings, filed as Exhibit 10.52 to the Annual Report on Form 10-K for 2010 of the Company, and incorporated herein by reference.
10.11Form of Change in Control Agreement, effective November 16, 2013, by and between the Company and Steven P. Geiger, R. Scott Rowe, Gary M. Halverson, Owen Serjeant, Brent Baumann, Mark Cordell, Hunter Jones, and Stefan Radwanski, filed as Exhibit 10.11 to the Annual Report on Form 10-K for 2013 of the Company, and incorporated herein by reference.
Form of Change in Control Agreement, effective July 1, 2014, by and between the Company and Dennis S. Baldwin and Douglas E. Meikle.
Form of Change in Control Agreement, effective August 7, 2014, by and between the Company and Steven W. Roll.
Form of Change in Control Agreement, effective December 9, 2014, by and between the Company and William S. Lamb.
10.15Form of Executive Severance Program of the Company, effective October 17, 2012 filed as Exhibit 10.27 to the Annual Report on Form 10-K for 2012 of the Company, and incorporated herein  by reference.
10.16Form of Indemnification Agreement, effective February 20, 2003, by and between the Company and C. Baker Cunningham, Sheldon R. Erikson, Michael E. Patrick and Bruce W. Wilkinson, filed as Exhibit 10.32 to the Annual Report on Form 10-K/A for 2002 of the Company, and incorporated herein by reference.
10.17Form of Indemnification Agreement, effective February 7, 2005, by and between the Company and Peter J. Fluor, filed as Exhibit 10.23 to the Annual Report on Form 10-K for 2008 of the Company, and incorporated herein by reference.
10.18Form of Indemnification Agreement, effective July 1, 2008, by and between the Company and Douglas L. Foshee, filed as Exhibit 10.24 to the Annual Report on Form 10-K for 2008 of the Company, and incorporated herein by reference.
10.19Form of Indemnification Agreement, effective June 12, 2009, by and between the Company and Jon Erik Reinhardsen, filed as Exhibit 10.28 to the Annual Report on Form 10-K for 2009 of the Company, and incorporated herein by reference.
10.20Form of Indemnification Agreement, effective August 13, 2007, by and between the Company and William C. Lemmer and Joseph H. Mongrain, filed as Exhibit 10.50 to the Annual Report on Form 10-K for 2010 of the Company, and incorporated herein by reference.
Exhibit NumberExhibit Index Description
10.21Form of Indemnification Agreement, effective January 1, 2011, by and between the Company and John C. Bartos, Mark L. Carter, Gary Devlin, Brad Eastman, Kevin Fleming, Hal J. Goldie, Gary M. Halverson, Grace B. Holmes, H. Keith Jennings, Jack B. Moore, Owen Serjeant, Charles M. Sledge, Edward E. Will and Amber Wootton, filed as Exhibit 10.51 to the Annual Report on Form 10-K for 2010 of the Company, and incorporated herein by reference.
10.22
Form of Indemnification Agreement, effective October 18, 2011, by and between the Company and Rodolfo Landim, filed as Exhibit 10.47 to the Annual Report on Form 10-K for 2011 of the Company, and incorporated herein by reference.
10.23Form of Indemnification Agreement, by and between the Company and William G. Lamb effective April 12, 2012, and James T. Hackett effective August 1, 2012, filed as Exhibit 10.36 to the Annual Report on Form 10-K for 2012 of the Company, and incorporated herein by reference.
10.24Form of Indemnification Agreement, effective December 9, 2013, by and between the Company and H. Paulett Eberhart, filed as Exhibit 10.22 to the Annual Report on Form 10-K for 2013 of the Company, and incorporated herein by reference.
10.25Consent and Third Amendment to Credit Agreement, dated as of June 28, 2013, among the Company and certain of its subsidiaries and the banks named therein and Citibank N.A., filed as Exhibit 10.1 to the Current Report on Form 8-K filed on July 2, 2013 of the Company, and incorporated herein by reference.
10.26Consent and Fourth Amendment to Credit Agreement, dated as of April 14, 2008, among the Company and certain of its subsidiaries and the banks named therein and JPMorgan Chase Bank, N.A., as agent, filed as Exhibit 10.1 to the Current Report on Form 8-K dated April 14, 2008, of the Company, and incorporated herein by reference.
10.27Credit Agreement, dated as of April 11, 2014, among the Company and certain of its subsidiaries and the banks named therein and Citibank, N.A., filed as Exhibit 10.1 to the Current Report on Form 8-K dated April 11, 2014, of the Company, and incorporated herein by reference.
10.28Form of Stock Option Agreement for stock option grants dated November 10, 2005, filed as Exhibit 10.47 to the Annual Report on Form 10-K for 2005 of the Company, and incorporated herein by reference.
10.29Form of Stock Option Agreement for stock option grants dated on or after April 1, 2009, filed as Exhibit 10.30 to the Annual Report on Form 10-K for 2009 of the Company, and incorporated herein by reference.
10.30Form of Stock Option Agreement for stock option grants dated on or after October 20, 2010, filed as Exhibit 10.39 to the Annual Report on Form 10-K for 2010 of the Company, and incorporated herein by reference.
10.31Form of Amendment dated October 20, 2010 to Stock Option Agreement, filed as Exhibit 10.49 to the Annual Report on Form 10-K for 2011 of the Company, and incorporated herein by reference.
10.32Form of Stock Option Agreement for stock option grants dated on or after October 18, 2012, filed as Exhibit 10.46 to the Annual Report on Form 10-K for 2012 of the Company, and incorporated herein by reference.
10.33Form of Stock Option Agreement for stock options granted on or after  October 17, 2013, filed as Exhibit 10.45 to the Annual Report on Form 10-K for 2013 of the Company, and incorporated herein by reference.
Exhibit NumberExhibit Index Description
Form of Stock Option Agreement for stock option grants dated on or after October 16, 2014.
10.35Form of Grant Agreement for restricted stock units granted on or after June 21, 2012, filed as Exhibit 10.50 to the Annual Report on Form 10-K for 2012 of the Company, and incorporated herein by reference.
10.36Form of Grant Agreement for restricted stock units granted on or after January 1, 2013, filed as Exhibit 10.51 to the Annual Report on Form 10-K for 2012 of the Company, and incorporated herein by reference.
10.37Form of Grant Agreement for restricted stock units granted on or after October 17, 2013, filed as Exhibit 10.46 to the Annual Report on Form 10-K for 2013 of the Company, and incorporated herein by reference.
Form of Grant Agreement for restricted stock units granted on or after October 16, 2014.
10.39Form of Grant Agreement for restricted stock units for Executive Officers granted on or after October 17, 2013, filed as Exhibit 10.47 to the Annual Report on Form 10-K for 2013 of the Company, and incorporated herein by reference.
Form of Grant Agreement for restricted stock units for Executive Officers granted on or after October 16, 2014.
10.41Form of Grant Agreement for performance-based restricted stock units granted on or after January 1, 2012, filed as Exhibit 10.54 to the Annual Report on Form 10-K for 2012 of the Company, and incorporated herein by reference.
10.42Form of Grant Agreement for performance-based restricted stock units granted on or after January 1, 2013, filed as Exhibit 10.55 to the Annual Report on Form 10-K for 2012 of the Company, and incorporated herein by reference.
10.43Form of Grant Agreement for performance-based restricted stock unit awards grants on or after January 1, 2014, filed as Exhibit 10.44 to the Annual Report on Form 10-K for 2013 of the Company, and incorporated herein by reference.
Form of Grant Agreement for performance-based restricted stock unit awards grants on or after January 1, 2015.
10.45Form of Deferred Stock Unit Agreement for restricted stock units for non-employee directors granted on or after December 9, 2013, filed as Exhibit 10.48 to the Annual Report on Form 10-K for 2013 of the Company, and incorporated herein by reference.
Form of Deferred Stock Unit Agreement for restricted stock units for non-employee directors granted on or after May 17, 2014.
Exhibit NumberExhibit Index Description
10.47NATCO Group, Inc. 1998 Employee Stock Option Plan, filed as Exhibit 10.3 to NATCO’s Proxy Statement on Form S-1 (No. 333-48851), and incorporated herein by reference.
10.48NATCO Group, Inc. 2004 Stock Incentive Plan, filed as Appendix B to NATCO’s Proxy Statement dated May 27, 2004, and incorporated herein by reference.
10.49OneSubsea LLC Nonqualified Deferred Compensation Plan, effective April 1, 2013, filed as Exhibit 4.5 to the Form S-8 dated June 25, 2013 and incorporated herein by reference.
14.1Code of Ethics for Management Personnel, including Senior Financial Officers, filed as Exhibit 14.2 to the Annual Report on Form 10-K for 2004 of the Company, and incorporated herein by reference.
Cameron Code of Conduct, effective April, 2013.
Code of Ethics for Directors effective August 8, 2014.
Subsidiaries of registrant.
Consent of Independent Registered Public Accounting Firm.
Certification.
Certification.
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*XBRL Instance Document
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit NumberExhibit Index Description
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document

2002.

*Filed herewith

SIGNATURES

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: April 1, 2016

CAMERON INTERNATIONAL CORPORATION

Registrant

(Registrant)

By:

/s/ Dennis S. Baldwin

(Dennis S. Baldwin)
Vice President, Controller and Chief Accounting Officer
(principal accounting officer)
Date: February 20, 2015

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on this 20th day of February, 2015, by the following persons on behalf of the Registrant and in the capacities indicated.

 Signature Title
/s/ C. Baker Cunningham
(C. Baker Cunningham)Director
/s/ H. Paulett Eberhart
(H. Paulett Eberhart)Director
/s/ Sheldon R. Erikson
(Sheldon R. Erikson)Director
/s/ Peter J. Fluor
(Peter J. Fluor)Director
/s/ Douglas L. Foshee
(Douglas L. Foshee)Director
/s/ James T. Hackett
(James T. Hackett)Director
/s/ Rodolfo Landim
(Rodolfo Landim)Director
/s/ Jack B. Moore
(Jack B. Moore)Chairman of the Board and Chief Executive Officer
(principal executive officer)
/s/ Michael E. Patrick
(Michael E. Patrick)Director
/s/ Jon Erik Reinhardsen
(Jon Erik Reinhardsen)Director
/s/ Bruce W. Wilkinson
(Bruce W. Wilkinson)Director
/s/ Charles M. Sledge

By: Charles M. Sledge

Senior Vice President and Chief Financial Officer

(Charles M. Sledge)

(principal financial officer)Principal Financial and Accounting Officer)

94

EXHIBIT INDEX

31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*Filed herewith

39